GST on payment received through Foreign Commission Agent

[Asked by Guest]

Hi,

We are a services company based in India and need help with GST related queries below for Foreign Commission Agent. Your help will be highly appreciated.

CASE

M/s A (Principal - an IT Services company based in India doing Export of Services and had also signed LUT) signs Agent Agreement with M/s B (a non-resident entity/foreign company based in USA). As per agreement, M/s B's responsibility is to generate new business for M/s A in his country (USA) and also collect payment on behalf of M/s A and then deposit it to M/s A's bank account in India. M/s B is also required to remain engaged with the customers, do follow ups, provide updates etc until the order is completed.

M/s A will then pay 70% commission to M/s B for all his services, on the basis of total completed sales and payments deposited by him in M/s A account.

Q1: As we read online, M/s B must raise an invoice on behalf of M/s A to qualify the definition of FOREIGN AGENT. What does this actually mean?

The invoice created by B should be GST compliant as per Indian Laws? Or M/s B must raise invoice as per laws in his country but with M/s A's name/details on it? We are confused by the meaning of "On behalf Of". Please help with the format and details it should have in the above scenario.

Q3: Since B is supposed to collect payment from customers, the money will go From Customer's account in USA to M/s B's account in USA to M/s A's bank account in India. Now, the invoice created by M/s A against this payment should be on the name of End Customer or the M/s B (agent)?

Q4: We are GST Exempted - Export of services. Will we be liable to pay GST under this arrangement?

Q5: Is this a valid arrangement as per definition of Agent?

Q5: As we understand, we do not need to deduct any TDS from the commissions paid to this foreign Agent. Is this correct?

Please help. It's urgent. Thank you for your help.

AI Summary

Intermediary classification determines GST: principal must discharge reverse charge on services procured via foreign agent.
A foreign representative acting as a Del Credere or ordinary agent located in a non taxable territory is treated as agent for and on behalf of the Indian principal; the principal must account for GST under the reverse charge mechanism as an import of service where applicable, record proceeds in its books whether invoices are raised by the agent or the principal, and the agent itself is not liable to Indian GST; contractual terms control treatment of guaranteed payments, commission entitlement, and recordkeeping.