Commission for Intermediary Services Not Considered "Export" under IGST Act

The commission received by M/s. Micro Instruments for intermediary services was not classified as an "export of services" under the IGST Act, 2017, and did not qualify for zero-rated tax. The supply of services by M/s. Micro Instruments was deemed an inter-state supply, attracting IGST at the rate of 18%.

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Issues Involved:

1. Whether the "Commission" received by the Applicant in convertible Foreign Exchange for rendering services as an "Intermediary" between an exporter abroad and an Indian importer is an "export of service" under section 2(6) of the IGST Act, 2017, attracting zero-rated tax under section 16(1)(a) of the IGST Act, 2017.
2. If the answer to the first question is negative, whether the impugned supply of service will be treated as an "intra-state supply" under section 8(1) of the IGST Act, 2017, attracting CGST/MGST, and if so, at what rate.

Detailed Analysis:

Issue 1: Export of Service

The applicant, M/s. Micro Instruments (MI), provides services to its German principals by procuring Purchase Orders (P.O.) from Indian customers for advanced Laboratory Equipment. The applicant receives commission in convertible foreign exchange for these intermediary services.

The applicant contends that the commission received should be classified as "export of service" under section 2(6) of the IGST Act, 2017, which would qualify for zero-rated tax under section 16(1)(a) of the same Act.

Section 2(6) of the IGST Act defines "export of services" as the supply of any service when:
- 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.
- The payment for such service has been received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

However, as per section 13(8)(b) of the IGST Act, the place of supply for "intermediary services" is the location of the supplier of services, which in this case is India. Therefore, the commission received by MI cannot be classified as "export of services" since the place of supply is not outside India.

Conclusion: The commission received by MI does not qualify as "export of services" under section 2(6) of the IGST Act, 2017, and therefore, does not attract zero-rated tax under section 16(1)(a).

Issue 2: Intra-State Supply

Given the negative response to the first issue, the next question is whether the supply of service by MI is an "intra-state supply" under section 8(1) of the IGST Act, 2017.

Section 13(8)(b) of the IGST Act specifies that the place of supply for intermediary services is the location of the supplier, which is in India. Therefore, the supply of services by MI, being located in India, does not qualify as an intra-state supply but as an inter-state supply.

Section 7(5)(c) of the IGST Act states that supply of goods or services in the taxable territory, not being an intra-state supply and not covered elsewhere in this section, shall be treated as inter-state supply.

Conclusion: The supply of services by MI is treated as an inter-state supply and not an intra-state supply. Consequently, IGST is applicable at the rate of 18%.

Order:

1. The commission received by the applicant for intermediary services is not considered as "export of services" under section 2(6) of the IGST Act, 2017.
2. The supply of services by the applicant is treated as an inter-state supply, attracting IGST at the rate of 18%.

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