Indian entity facilitating overseas supply connections qualifies as intermediary service under IGST Act section 13

AAR West Bengal ruled that services provided by an Indian entity to overseas clients for arranging/facilitating supply of goods constitute intermediary services under IGST Act 2017. The applicant procured purchase orders from Indian buyers and connected them with overseas suppliers who dispatched goods directly. Since the applicant earned commission-based fees and facilitated transactions without supplying goods on own account, it qualified as intermediary. The place of supply was determined as India under section 13, making it intra-State supply subject to regular tax, not zero-rated export of services.

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Issues: Classification of services as export of services under the IGST Act

Issue 1: Classification of services provided by the applicant
The Authority for Advance Ruling, West Bengal examined whether the services provided by the applicant, involving arranging sales of goods for overseas manufacturers/traders, qualify as 'export of services' under the IGST Act, 2017. The applicant contended that the services should be considered as export of services as per the relevant provisions.

Issue 2: Interpretation of the term 'intermediary'
The Authority analyzed the definition of 'intermediary' under clause (13) of section 2 of the IGST Act, 2017, which includes a 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. The key consideration was whether the applicant's activities aligned with the definition of an intermediary.

Issue 3: Determination of place of supply
The Authority delved into the determination of the place of supply under section 13 of the IGST Act, 2017, particularly when the location of the supplier is in India and the recipient is outside the country. This analysis was crucial in deciding the tax implications and whether the services could be categorized as zero-rated supply.

Detailed Analysis:
The Authority noted that the applicant's role in connecting buyers with overseas suppliers, receiving commission, and not assuming obligations on behalf of the parties resembled that of an 'intermediary.' Despite the applicant's assertions of not acting as an agent, the nature of services provided indicated characteristics of an intermediary as defined in the IGST Act.

The examination of the place of supply revealed that since the applicant, as the supplier of services, was located in India, the transaction did not meet the criteria for export of services under the IGST Act. Consequently, the services were deemed as an intra-State supply, attracting applicable tax implications.

In conclusion, the Authority ruled that the services rendered by the applicant in arranging sales of goods did not qualify as 'export of service' under the IGST Act, 2017. The ruling was subject to the provisions of the GST Act unless declared void under the specified sections.

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