Commission services to foreign corporation for machinery sales qualify as intermediary services under Section 13(8)(b)

AAR Gujarat ruled that commission services provided by an applicant to a Japanese corporation for machinery sales constitute intermediary services under GST. Since the applicant (service supplier) is located in Gujarat, the place of supply is Gujarat per Section 13(8)(b). This makes it an intra-state supply liable to CGST and SGST at 18% rate, not reverse charge mechanism. The applicant's current practice of paying CGST and SGST was deemed correct.

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Issues:
Determining whether the services provided by the applicant are liable to CGST and SGST or IGST based on the nature of the transaction.

Analysis:
The applicant entered an agreement with a Japanese corporation to sell machinery and receive commission income. They faced issues with GST payments and refunds due to classification errors. The applicant sought an advance ruling on whether to charge CGST and SGST or IGST for their services. The Authority considered the nature of the transaction, defined as intermediary services under Section 2(13) of the IGST Act, 2017. The services were classified under Heading 9961, attracting 18% GST liability as per relevant notifications.

The determination of CGST and SGST or IGST liability depends on the type of supply and place of supply. Since the recipient was located outside India, Section 13 of the IGST Act, 2017 was referenced to ascertain the place of supply. Sub-section (8)(b) of Section 13 specified that the place of supply for intermediary services is the location of the supplier. As the applicant was located in Gujarat, the supply was considered intra-state, making them liable for CGST and SGST at 18%.

In conclusion, the Authority ruled that the applicant is liable to pay GST at the rate of 18% (9% CGST + 9% SGST) based on the nature of the transaction.

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