GST Liability

[Ethirajan Parthasarathy]

'A' in Karnataka is engaged in sale of Rail Pass for tourists to Britain. 'A' will get commission from foreign principal for every pass sold.

'A' engages services of 'B' in Tamil Nadu to co–ordinate with prospective tourists, generate invoice for pass sold and 'B' is authorised to collect some amount from tourist as services fee. 'A' does not pay 'B' any service charges. In other words, 'B' in Tamil Nadu renders services to 'A' in Karnataka but collects fee from person located in Tamil Nadu. The Questions are

Whether 'B' should pay CGST or IGST on processing fee received from tourist.

Whether the commission received by 'A' from foreign company can be treated as 'Export Services'. If not, 'A' should pay CGST or IGST

[Shilpi Jain]

The recipient of service for B's service is A. So it should be IGST since the supplier is in TN and the place of supply is Kar.

The services provided by A, the recipient is the foreign principal. Why are you using the reference 'principal'. In case the terms of the contract are such that the services are that of an intermediary, the GST would be liable for the commission received.

If not intermediary service and A provides the services actually on his own account then it could be an export of service (more detail on the service required).

[ABHISHEK TRIPATHI]

Dear Sir,

Just for knowledge - How is he/she providing rail passes (hope its indian rail passes) to foreign travelers, when the government has discontinued the same?

Intermediary situation may become issue in this case.

[Ganeshan Kalyani]

In my view, B is collecting fee from person i.e. tourist located in Tamil Nadu. Being B is in Tamil Nadu he will charge CGST+SGST and pay GST. And there is second transaction where B supplies service to A in which case IGST is applicable.

AI Summary

Place of supply rules govern tax: local collection attracts CGST/SGST; cross state supply attracts IGST; export depends on intermediary status. Taxation depends on characterization of recipients and place of supply: B's fee collected from a local tourist is a local supply attracting CGST and SGST if the tourist is the recipient, while B's supply to A (recipient in another state) is subject to IGST because the place of supply is the recipient's location. A's commission from a foreign principal is taxable as intermediary commission if the contract evidences an intermediary role; if A provides services on his own account and export conditions are met, the commission may qualify as export of services.