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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 ..... and Goods and Services Tax Act, 2017 (hereinafter referred to as the JGST Act ), hereby clarifies the issues in succeeding paragraphs. 2. Scope of intermediary services 2.1 Intermediary has been defined in sub-section (13) of section 2 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the 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 inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered as an intermediary service. An intermediary essentially 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 sub-contracts a part or whole of it to C . Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 providing main supply of service of design and development of software to A , and thus, C is not an intermediary in this case. Illustration 3 : An insurance company P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng/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 paragraph 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 intermediary services within the meaning of sub-section (13) of section 2 of the IGST Act, would depend upon the facts of the specific case. While examining the facts of the case and the terms of contract, the basic characteristics of intermedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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