GST on intermediary Services

[Kaustubh Karandikar]

PQR, Switzerland is the parent company of XYZ(India). The services provided by XYZ(India) to PQR, Switzerland, are mainly in connection with ‘Information Technology assistance services relating to system and knowledge engineering. Further, XYZ also undertakes to provide services in connection with providing infrastructure support for global delivery centre which includes services to other separate legal entities / group companies of XYZ. In this connection, instructions are received by XYZ directly from the group companies and not through PQR. Payment against the same received by XYZ from PQR in foreign currency including for the services supplied to other separate legal entities/ group companies of XYZ. Subsequently, PQR is recovering the amount from the respective group companies against the amount initially paid to XYZ. Is XYZ required to pay GST on the amount recovered from PQR? As per the recent circular no. 159 of CBIC, following are my views:

As per the circular, the use of the expression “arranges or facilitates” in the definition of “intermediary” suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply and does not himself provides the main supply. Thus, the role of intermediary is only supportive. In cases wherein the person supplies the main supply, either fully or partly, on principal to principal basis, the said supply cannot be covered under the scope of “intermediary”. Also the Illustration No.4 is more or less fitting in to the present query. Therefore, in my view, this will not be treated as intermediary service and will be treated as export of service and therefore XYZ is not required to pay GST on the amount received from PQR. Views / Guidance from the experts please.

[Shilpi Jain]

Yes. Since XYZ is providing services on its own account it will not be an intermediary merely because consideration is routed through PQR.

[KASTURI SETHI]

Sh. Kaustubh Karandikar Ji,

Sir, I concur with your views. Your grasping, interpretation, analysis,conclusion of the complicated issues are penetrative and hence always par excellence. Your queries are brain storming and hence enrich the knowledge of experts also.

Art of questioning is not everybody's cup of tea. It is innate quality and gifted by God to you. This is a fact and no exaggeration.

[KASTURI SETHI]

Answering a simple question is no achievement. An expert in real terms is that person who answers your complicated queries correctly. Answers/views/replies must be the result of original as well as creative thinking (which are not found in books and journals) otherwise all experts have books and journal with them. Even 'pillars' find themselves hard up in GST field.

Your queries appear simple but are not simple.

[Kaustubh Karandikar]

Respected Kasturi ji

Thanks for your kind and encouraging words. I am also learning a lot from answers to your queries which are very valuable and useful to me.

AI Summary

Intermediary services classification: supplies made on supplier's own account treated as export, not intermediary for GST purposes. Characterisation hinges on whether the supplier acts as an intermediary (a subsidiary, facilitative role arranging another's supply) or supplies on its own account; where the supplier provides the main service on a principal-to-principal basis, it falls outside the intermediary scope. Payments routed through a parent do not alone make the supplier an intermediary, so services supplied by the Indian entity to group companies and paid via the parent are treated as supplies on the supplier's own account and as export of services.