SAC Code & POS required for Commission Income

[Ashiesh Prremji]

Dear Experts,

We have commission income on account of contract with one party (Location outside India) who supplies IT related software to our customers ( Outside India & within India both). Sometimes we also provide development services on that software as required by customers & we charge separately to customers for that.

Please suggest regarding POS that it is Export or not and SAC to be used for that commission Income ?

Thank You !

[Amit Agrawal]

In terms of Section 13 (8) (b) of IGST Act, 2017, place of supply - in case of intermediary services - is the location of the supplier.

As location of supplier - in given case - is in India and location of service recipient (i.e. who pays commission) is outside India, place of supply is location of the supplier (i.e. 'India') in terms of above quoted sub-section.

One of the condition for treating any service as "export" - in terms of Section 2 (6) of the IGST Act, 2017 - is that the place of supply of service should be outside India.

As this condition is not fulfilled, given services cannot be treated as 'Export of Service" under current GST laws.

Next question is nature of taxes (i.e. CGST & SGST or IGST) which is payable on said transaction. In other words, whether said supply is 'intra-state' or 'inter-state' supply?

These are highly controversial issue/s and the same will ultimately decided by our Apex court - in one way or other. Till then, my views are as follows:

A. Section 8 (2) of the IGST Act, 2017 is subject to provisions of section 12. Section 12 determines place of supply of services where location of supplier and recipient is in India, which is not the situation described above. Hence, subject supply as not "intra-state" in my view. Just FYI: I have explained my views in very brief on TMI sometimes back on 28.01.2021 under issue-ID No. 116950 bearing subject-line: GST on intermediary service.

B. But, I also hold view that subject transaction is not inter-state supply either. And I explained reasons behind my views on TMI long back on 29.01.2019 in my article (Article ID - 8346) on this portal: A view: Why ‘Intermediary Service provided to recipient located outside India’ cannot fall under ‘Inter-State Supply’ and Why IGST is not leviable there against? And alternatively, why such provision treating it as ‘Inter-State Supply’ will be unconstitutional?

Link to said article:

https://www.taxtmi.com/article/detailed?id=8346

Summarizing above, I am of the view that neither IGST nor 'CGST & SGST' is payable on subject transaction as same is not taxable under current GST laws.

These are strictly my personal views. And same should not be construed as professional advice or suggestion in any way.

[RangaRao Kilaru]

1. if the commission income is received in foreign exchange then it is treated is export of service and no tax is payable.

2.on developement service provided by you: If it is to a person located outside India and foreign exchange is received then it it is not taxable. if it is provided to person located in India, it taxable.

AI Summary

Place of supply determines export status: intermediary services with supplier in India are not export of service under IGST rules. Place of supply for intermediary services is the supplier's location under Section 13(8)(b) IGST; where the supplier is in India and the payer is outside India, the place of supply is India and the service does not qualify as export. Commentators differ on tax consequences: one contends the supply may be non-taxable under both IGST and CGST/SGST; another treats receipts in foreign exchange to recipients abroad as export (not taxable) while services to Indian recipients remain taxable.