Service rendered to foreign company

[Asked by Guest]

I have a query where one Indian company is serving a foreign company as an agent for procuring goods from overseas and selling the goods to India, the outgoing payment and incoming payment is effected to the foreign company and the Indian company is charging services in respect to the buying and selling arrangement.

Is the Indian company liable to charge gst on such services or not since the service is export oriented being served to a foreign entity in foreign currency without any value addition of the goods in India or anywhere.

[Ganeshan Kalyani]

What is the model of transaction?

[KASTURI SETHI]

As per Section 2(79) of CGST Act “non-taxable territory” means the territory which is outside the taxable territory; e.g. any foreign country etc.

Commission Agent cannot be owner of goods. He is only intermediary only.

Also read the concept of High Sea Sales.

[KASTURI SETHI]

Also read this

Notification 10/2017-IGST(Rate) dated 28.6.17

Sl. No.	Category of Supply of Services	Supplier of service	Recipient of Service
(1)	(2)	(3)	(4)
1	Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.	Any person Located in a non-taxable territory	Any person located in the taxable territory other than non-taxable online recipient

10

Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.

A person located in non-taxable territory

Importer, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory.

[CSSANJAY MALHOTRA]

All experts have correctly placed their views that the activity is taxable.

Refer to the provisions of IGST Act, section 13(8) (b) which is applicable in your case as service provider being you and recipient is based in different country.

Place of provision of service is the place of service provider in case of intermediary, hence service by whatever name you call i.e Agent, Commission is subject to GST. The same in no way treated as export of service.

GST is leviable.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,. Sir thanks for finalisation of the issue. All doubts stand cleared now. The querist must be satisfied now.

[ANITA BHADRA]

Dear Sir / Madam

In my view it is not export of services in the light of following provisions of IGST Act 2017:-

Section 7(5) of IGST Act which provides " Supply of goods or services or both,––

(a)		when the supplier is located in India and the place of supply is outside India;
(b)		to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c)		in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

A plain reading of above provisions imply that where the location of supplier( service provider) is in India and place of supply is outside India it would be regarded as interstate supply and therefore fall under purview of section 5 of IGST act and hence leviable to IGST.

the provisions related to levy of GST on services which have place of supply outside India but does not qualify as export.

Further , you are working as an intermediary and Place of supply for intermediary will be the location of the intermediary in case recipient / service provider is outside India ..

Since place of supply (of your services ) is not outside India , it is not export of services as per Section 2(6)(iii) of IGST Act .

Experts are requested to correct if I am wrong .

Regards

CA Anita Bhadra

[KASTURI SETHI]

Sh.Sanjay Malhotra, CS has never been wrong since my introduction in this forum.So we can trust in his replies with out buts and ifs.

[Archna Gupta]

In your case the Indian company is working as an agent of foreign company whose job is to facilitate the transaction in goods between foreign supplier and Indian customer. Your company is charging service charges/ commission from foreign company. The transaction value of goods is directly impacting the foreign company's bank account.

Your services will be treated as intermediary services and in case of intermediary services place of supply is "Location of supplier".

Actually in order to determine, whether the supply is Intra State supply or Inter State supply, two factors are involved and they are (1) Place of supply, (2) Location of supplier. If both are in same state then supply is 'Intra State" and if they are in different State , the supply will be 'Inter State supply'

Now come back to your case. In your case the supply is intermediary services. In Intermediary services the place of supply will always be the 'Location of supplier" (Please refer Section 13(8)(b) of IGST Act, 2017). So the both factors are 'Location of supplier' and you will charge CGST+SGST.

Your services will not be covered in "Export of Services" because the place of supply is India.

[Vijay kumar]

In my view, there are two supplies involved - (i) supply of goods and (ii) supply of service.

As regards supply of goods by the UAE company to an Indian entity directly (and not through the agent, as per the query), is an import by the Indian entity and accordingly IGST will attract, apart from BCD.

As regards supply of agency service by your company to the UAE company, please refer to Section 13 (8)(b) r/w Section 2(13) of the IGST Act, 2017. Yours being an intermediary service, the place of supply is the location of the supplier of service, which is in India, it would be taxable and you are liable to pay IGST. The export of service criteria, to the extent of place of supply is not satisfied in your case and hence it cannot be treated as export of service.

AI Summary

Intermediary services where place of supply is the supplier's location are taxable under GST, not export of service.
The transaction is characterised as intermediary services: an Indian agent arranging purchases and sales for a foreign principal without taking ownership. Under IGST Act section 13(8)(b) the place of supply for intermediary services is the location of the supplier; with the supplier in India the place of supply is India. Export of services under section 2(6) requires the place of supply to be outside India and other cumulative conditions; mere receipt of foreign exchange and cross border movement of goods do not alone make the agent's commission an export of service.