Commission agent facilitating machinery sales provides intermediary services, not goods supply, attracting CGST and SGST under Section 9(1)

AAR Gujarat ruled that an applicant acting as commission agent for Korean machinery company UKIL Machinery Co. Ltd. provides intermediary services, not supply of goods. The applicant facilitates sales between foreign principal and Indian buyers for commission, establishing a principal-agent relationship. Since the applicant's location in Gujarat determines the place of supply under Section 13(8) of IGST Act 2017, and both supplier and place of supply are in Gujarat, this constitutes intra-state supply liable to CGST and SGST under Section 9(1) of CGST Act 2017.

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Issues Involved:
1. Applicability of IGST or CGST + SGST on the services provided by the applicant.

Detailed Analysis:

Nature of the Transaction:
The applicant, M/s. Sagar Powertex Pvt. Ltd., is engaged in the agency business of weaving machineries, acting as an agent for foreign entities supplying machinery directly to end customers in India. The applicant receives a commission for facilitating these transactions, thereby establishing a Principal-Agent relationship.

Definition of Intermediary:
The core issue is whether the services provided by the applicant fall under the category of intermediary services. As per Section 2(13) of the IGST Act, 2017, an intermediary is defined as a broker, agent, or any other person who arranges or facilitates the supply of goods or services between two or more persons but does not supply such goods or services on their own account.

Analysis of the Agreement:
The agreement between the applicant and UKIL Machinery Co. Ltd. specifies that the applicant is the exclusive sales agent for the company's machinery in India, earning a commission on sales. The applicant's role is to facilitate these sales, confirming their status as an intermediary.

Place of Supply:
The determination of whether CGST + SGST or IGST is applicable hinges on the place of supply. According to Section 13 of the IGST Act, 2017, the place of supply for intermediary services is the location of the supplier of services. In this case, the supplier (applicant) is located in Gujarat.

Tax Implications:
Since the location of both the supplier and the place of supply is in Gujarat, the transaction is considered an intra-state supply. Consequently, the services provided by the applicant are subject to CGST and SGST as per Section 9(1) of the CGST Act, 2017.

Conclusion:
The applicant is liable to pay CGST and SGST for the intermediary services provided, as both the supplier and the place of supply are located in Gujarat.

Ruling:
Q.1 In the said transaction, whether IGST is applicable or CGST + SGST is applicableRs.

Ans. The applicant is liable to payment of CGST and SGST for the services provided as an "intermediary."

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