Overseas commission agent qualifies as intermediary but services don't constitute import under IGST Act section 2(13)

The AAR, Uttarakhand ruled that an overseas commission agent facilitating supply of goods to international markets qualifies as an intermediary under section 2(13) of IGST Act, 2017. However, the services received from the overseas agent do not constitute import of services since the place of supply is outside India (UAE), failing to meet condition (iii) of the definition. Consequently, the applicant is not required to pay GST on reverse charge mechanism basis under section 5(3) of IGST Act, 2017 on commission paid to the overseas agent, as the transaction falls outside the ambit of import of services.

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Issues Involved:
1. Whether the Overseas Commission Agent is covered within the definition of 'intermediary' under section 2(13) of the IGST Act, 2017.
2. Whether services received by the applicant from the Overseas Commission Agent fall within the meaning of 'import of services' under section 2(11) of the IGST Act, 2017.
3. Whether the applicant is required to pay GST on a reverse charge mechanism (RCM) basis under section 5(3) of the IGST Act, 2017 on the commission paid to the Overseas Commission Agent.

Detailed Analysis:

Issue 1: Definition of 'Intermediary'
The applicant sought clarification on whether the Overseas Commission Agent falls under the definition of 'intermediary' as per section 2(13) of the IGST Act, 2017. The definition states that an "Intermediary" means a broker, an agent, or any other person who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both on his own account.

Upon reviewing the Memorandum of Understanding (MOU) dated 05.03.2021, it was observed that the Overseas Commission Agent, Mr. Bobby Kapoor, facilitates the export of goods by arranging purchase orders from foreign customers. He does not supply goods on his own account but rather connects the applicant with potential buyers and earns a commission based on the FOB value of the consignment exported. Therefore, it was concluded that Mr. Bobby Kapoor falls within the definition of 'intermediary' as per section 2(13) of the IGST Act, 2017.

Issue 2: Import of Services
The applicant questioned whether the services received from the Overseas Commission Agent qualify as 'import of services' under section 2(11) of the IGST Act, 2017. The definition requires that:
(i) The supplier of service is located outside India;
(ii) The recipient of service is located in India; and
(iii) The place of supply of service is in India.

While the first two conditions were satisfied (Mr. Bobby Kapoor is located in UAE and the applicant is located in India), the third condition was not met. According to section 13(8)(b) of the IGST Act, 2017, the place of supply for intermediary services is the location of the supplier of services, which in this case is outside India (UAE). Consequently, the services received do not qualify as 'import of services' since the place of supply is not in India.

Issue 3: GST on Reverse Charge Mechanism (RCM)
The applicant sought clarity on whether they are required to pay GST on a reverse charge mechanism basis under section 5(3) of the IGST Act, 2017 for the commission paid to the Overseas Commission Agent. Section 5(3) specifies that the Government may notify categories of supply of goods or services on which tax shall be paid on a reverse charge basis by the recipient.

Since the transaction in question pertains to intermediary services which do not qualify as 'import of services' (as the place of supply is outside India), it was concluded that GST under reverse charge is not applicable. Therefore, the applicant is not required to pay GST on the commission paid to the Overseas Commission Agent under section 5(3) of the IGST Act, 2017.

Ruling:
(i) The Overseas Commission Agent is covered within the definition of 'intermediary' as per section 2(13) of the IGST Act, 2017.
(ii) Services received from the Overseas Commission Agent do not fall within the meaning of 'import of services' under section 2(11) of the IGST Act, 2017.
(iii) The applicant is not required to pay GST on a reverse charge mechanism basis under section 5(3) of the IGST Act, 2017 on the commission paid to the Overseas Commission Agent.

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