Back office support services to overseas clients don't qualify as zero-rated export under section 16 IGST Act when provider acts as intermediary

The AAR Maharashtra ruled that the applicant's back office support services to overseas clients do not qualify as zero-rated supply under section 16 of IGST Act. The applicant was classified as an intermediary facilitating supply between overseas clients and their customers. Since the place of supply for intermediary services is the supplier's location (Maharashtra, India), and the transaction failed to satisfy condition (iii) of the export of services definition under section 2(6), the services cannot be considered export of services. The authority distinguished this case from the GoDaddy precedent, noting the applicant's services were provided on behalf of clients rather than on a principal-to-principal basis.

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Issues Involved:
1. Whether the services proposed to be rendered by the applicant qualify as 'Zero Rated Supply' under Section 16 of the Integrated Goods and Services Tax Act, 2017.
2. Whether the applicant is considered an 'intermediary' under the IGST Act.
3. Determination of the place of supply of services.

Detailed Analysis:

1. Whether the services proposed to be rendered by the applicant qualify as 'Zero Rated Supply' under Section 16 of the Integrated Goods and Services Tax Act, 2017:
The applicant, Vservglobal Private Limited, sought an advance ruling to determine if their back-office support services qualify as 'Zero Rated Supply' under Section 16 of the IGST Act, 2017. The applicant contended that their services satisfy all conditions for 'Export of Services' as defined in Section 2(6) of the IGST Act, which includes:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply of service is outside India.
- Payment for such service is received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

2. Whether the applicant is considered an 'intermediary' under the IGST Act:
The applicant argued that they are not intermediaries but provide services on a principal-to-principal basis. They referenced the definition of 'intermediary' under Section 2(13) of the IGST Act, which excludes persons supplying goods or services on their own account. The applicant cited the case of GoDaddy India Web Services Pvt Ltd, where similar services were ruled not to be intermediary services.

3. Determination of the place of supply of services:
The jurisdictional officer argued that the application is not maintainable as it pertains to 'place of supply,' which is not covered under the questions that can be sought for advance ruling as per Section 97(2) of the CGST Act. The officer further contended that the services provided by the applicant are not 'export of services' as the place of supply is within India, given that the recipient's fixed establishment is in India.

Observations and Ruling:
The Authority for Advance Ruling (AAR) examined the service agreement and concluded that the applicant facilitates the supply of goods or services between the client and its customers, thus falling under the definition of 'intermediary' as per Section 2(13) of the IGST Act. Consequently, the place of supply for intermediary services is the location of the supplier, which is in India, as per Section 13(8) of the IGST Act.

Since the place of supply is in India, the services do not qualify as 'export of services' under Section 2(6) of the IGST Act. Therefore, the services cannot be considered 'Zero Rated Supply' under Section 16 of the IGST Act.

Order:
The AAR ruled that the services proposed to be rendered by the applicant do not qualify as 'Zero Rated Supply' in terms of Section 16 of the IGST Act, 2017. The application was answered in the negative.

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