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TMI BlogClarification on doubts related to scope of “Intermediary”X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to scope of Intermediary -reg. The Government of India. Ministry of Finance. Department of Revenue, Central Board of Indirect Taxes and Customs, GST Policy Wing vide Circular No. 159/15/2021-GST dated 20 th September. 2021 has issued a clarification on doubts related to scope of Intermediary , in order to ensure uniformity in the implementation of the provisions of law across the field formations, which is annexed herewith. In exercise of powers conferred by section 168 of the Tripura State Goods and Services Tax Act, 2017 (Tripura Act No. 9 of 2017) for the purpose of uniformity in the implementation of the Act it is instructed to follow the clarification issued vide Circular No. 159/15/2021-GST dated 20 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary services 2.1 Intermediary has been defined in the sub-section (13) of section 2 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as IGST Act) as under Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account. 2.2 The concept of intermediary was borrowed in GST from the Service Tax Regime. The definition of intermediary in the Service Tax law as given in Rule 2(f) of Place of Provision of Services Rules, 2012 issued vide noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly arranges or facilitates another supply (the main supply ) between two or more other persons and, does not himself provide the main supply. 3.2 Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of intermediary services; (1) Main supply, between the two principals, which can be a supply of goods or services or securities; (2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply cannot be covered under the scope of intermediary . 3.5 Sub-contracting for a service is not an intermediary service: An important exclusion from intermediary is sub-contracting. The supplier of main service may decide to outsource the supply of the main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof, and does not merely arrange or facilitate the main supply between the principal supplier and his customers, and therefore, clearly is not an intermediary. For instance, A and B have entered into a contract as per which A needs to provide a service of, say, Annual Maintenance of tools and machinery to B . A subcontracts a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the main supply of the machinery, C , is facilitating the supply of machine between A and B . In this arrangement, C is providing the ancillary supply of arranging or facilitating the main supply of machinery between A and B and therefore, C is an intermediary and is providing intermediary service to A . Illustration 2 A is a software company which develops software for the clients as per their requirement. A has a contract with B for providing some customized software for its business operations. A outsources the task of design and development of a particular module of the software to C , for which C may have to interact with B , to know their specific requirements. In this case, C is pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to the said supply of computers. A decides to outsource the task of providing customer care services to a BPO firm, B . B provides customer care service to A by interacting with the customers of A and addressing / processing their queries / complains. B charges A for this service. B is involved in supply of main service customer care service to A , and therefore, B is not an intermediary. 5. The illustrations given in para 4 above are only indicative and not exhaustive. The illustrations are also generic in nature and should not be interpreted to mean that the service categories mentioned therein are inherently either intermediary services or otherwise. Whether or not, a specific service would fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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