Service rendered to foreign company, Goods and Services Tax - GST

[Varsha Baid]

I have a query where one Indian company is serving a foreign company as an agent for procuring goods from overseas and selling the goods to India, the outgoing payment and incoming payment is effected to the foreign company and the Indian company is charging services in respect to the buying and selling arrangement.

Is the Indian company liable to charge gst on such services or not since the service is export oriented being served to a foreign entity in foreign currency without any value addition of the goods in India or anywhere.

Posts / Replies

[KASTURI SETHI]

Ultimately enjoyment of service is in India Hence taxable.

[MARIAPPAN GOVINDARAJAN]

It is taxable.

[Varsha Baid]

Thanks for your reply. But still I have a doubt that beneficiary is foreign company and services rendered is outside India. India company is only acting as an agent of Foreign company in UAE to facilitate the supply and delivery of goods and they are not serving any Indian entity. Money related to goods is also received in UAE. There is no cash transaction in India. Agents are getting their commission in foreign currency in dollars. Is still applicable for GST

[Ramaswamy S]

Yes Taxable.

Regards

S.Ramaswamy

[KASTURI SETHI]

Only receipt of foreign exchange for India would not suffice There are so many other factors to determine whether it is export of service or not.

[Varsha Baid]

Place of supply of service is also outside India. Can you please provide the relevant section to refer.

[Ganeshan Kalyani]

It is taxable.

[Rajagopalan Ranganathan]

Sir,

According to Section 2 (6) if IGST Act, 2017 “export of services” means the supply of any service when,––

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

Explanation 1 of Section 8 of IGST Act, 2017 stipulates that-

For the purposes of this Act, where a person has,––

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

In my opinion conditions (i) to (iv) of Section 2 (6) of IGST Act, 2017 are satisfied and hence what you are doing is export of service and according to Section 16 (1) of IGST Act, 2017 is "zero rated" supply. hence you need not pay any gst.

 

[KASTURI SETHI]

Query and cross query do not match. There is a difference between the language of both. It sometimes happens.

[KASTURI SETHI]

At first the querist said,"Selling the goods to India".

[Ganeshan Kalyani]

Selling goods in India is taxable whereas the service which the querist provide to foreign company being an export of service is exempted.

I guess experts commented on the goods part.

[KASTURI SETHI]

Dear Sh.Kalyani Ji,. Due to improper drafting of query, situation is fluid and hence not cannot be said that it is doubt free.

[Ganeshan Kalyani]

Sri Kasturi Sir, i totally agree with you. The query drafting is very important because experts present their views based on the same. The background of the issue, present difficulty and question should be apparent.Thanks

[KASTURI SETHI]

Dear Sh.Kalyani Ji,. I want to further share with you on this issue. Procurement of purchase order is a Supply of Service. And selling the goods is supply of goods. In this case both are not independent. They are completely intermingled.

[Varsha Baid]

Thank u for your responses.

I am putting the query in a more detailed way :

A Uae company hires an agent in india who is arranging the supplies from Europe and USA and the subsequent selling arrangements to Indian customers. The shipments are coming from Europe/USA ports to Indian ports, there is nowhere agent's involvement in stocking or adding any value to such goods in India or anywhere. The deliveries of goods are taken by the customers upon payment to the uae company. The Indian agent is simply facilitating the sales for uae company as an agent directly from European Port.

[KASTURI SETHI]

In view of revised query by the querist, I am of the view that export of service is here and supply of goods is from non-taxable territory to non-taxable territory. Hence GST is not applicable.

[Varsha Baid]

Sir can you please provide me the relevant section to refer non taxable territory. Please guide me how we are considering Europe and India as non taxable territory so that I can have much clear view.

[KASTURI SETHI]

Your further query has been received through email but not in this forum.

[Varsha Baid]

Posting same again as you said this came in email and not in forum

Sir can you please provide me the relevant section to refer non taxable territory. Please guide me how we are considering Europe and India as non taxable territory so that I can have much clear view.

[KASTURI SETHI]

Who is the owner of the goods ? Whether ownership transferred ? How are you mentioning 'India' when agent in India only facilitated the purchase and sale in foreign country ? Are you mentioning India on the basis of consignment passed through Indian Territory ? Were the goods unloaded in Indian territory ? I have not mentioned 'India' as non-taxable territory ?

[Ganeshan Kalyani]

What is the model of transaction?

[KASTURI SETHI]

As per Section 2(79) of CGST Act “non-taxable territory” means the territory which is outside the taxable territory; e.g. any foreign country etc.

Commission Agent cannot be owner of goods. He is only intermediary only.

Also read the concept of High Sea Sales.

[KASTURI SETHI]

Also read this

Notification 10/2017-IGST(Rate) dated 28.6.17

Sl. No.	Category of Supply of Services	Supplier of service	Recipient of Service
(1)	(2)	(3)	(4)
1	Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.	Any person Located in a non-taxable territory	Any person located in the taxable territory other than non-taxable online recipient

10

Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.

A person located in non-taxable territory

Importer, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory.

[CS SANJAY MALHOTRA]

All experts have correctly placed their views that the activity is taxable.

Refer to the provisions of IGST Act, section 13(8) (b) which is applicable in your case as service provider being you and recipient is based in different country.

Place of provision of service is the place of service provider in case of intermediary, hence service by whatever name you call i.e Agent, Commission is subject to GST. The same in no way treated as export of service.

GST is leviable.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,. Sir thanks for finalisation of the issue. All doubts stand cleared now. The querist must be satisfied now.