TaxTMI 
TaxTMI 
POS - Services in relation to Intermediary services (Where either the supplier or the recipient is located outside India) [ Section 13(8)(b) of IGST Act ]
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to the foreign client. In such cases, the agreement/ contract for providing the media space and broadcast of the advertisement is directly between media owner and the foreign client. The media owner directly invoices the foreign client for providing the media space and broadcast of the advertisement and the foreign client remits the payment for the said services directly to the media owner. In such instances, the services of providing media space and broadcasting the advertisement are directly provided by the media owner to the foreign client. In such cases, the advertising company is merely facilitating the provision of the said services of providing media space and broadcasting the advertisement between the foreign client and the media owner and does not provide the said services on its own account. The advertising company invoices the foreign client for the facilitation services provided by it. 5.1 Consequently, in such cases, the advertising company is an "intermediary" in accordance with Section 2(13) of the CGST Act, 2017, as elucidated in Circular No. 159/15/2021-GST dated 20.09.2021, in respect of the said services of facilitating the foreign client and accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account;" From the perusal of the definition of "intermediary" under IGST Act as well as under Service Tax law, it is evident that there is broadly no change in the scope of intermediary services in the GST regime vis-à-vis the Service Tax regime, except addition of supply of securities in the definition of intermediary in the GST Law. Primary Requirements for intermediary services The concept of intermediary services, as defined above, requires some basic prerequisites, which are discussed below: * Minimum of Three Parties: By definition, an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus a natural corollary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (the main supply) and one arranging or facilitating (the ancillary supply) the said main supply. An activity between only two parties can, therefore, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exclusion from intermediary is sub-contracting. The supplier of main service may decide to outsource the supply of the main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof, and does not merely arrange or facilitate the main supply between the principal supplier and his customers, and therefore, clearly is not an intermediary. For instance, 'A' and 'B' have entered into a contract as per which 'A' needs to provide a service of, say, Annual Maintenance of tools and machinery to 'B'. 'A' subcontracts a part or whole of it to 'C'. Accordingly, 'C' provides the service of annual maintenance to 'A' as part of such sub-contract, by providing annual maintenance of tools and machinery to the customer of 'A', i.e. to 'B' on behalf of 'A'. Though 'C' is dealing with the customer of 'A', but 'C' is providing main supply of Annual Maintenance Service to 'A' on his own account, i.e. on principal to principal basis. In this case, 'A' is providing supply of Annual Maintenance Service to 'B', whereas 'C' is supplying the same service to 'A'. Thus, supply of service by 'C' in this case will not be consid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ple 4:- 'A' is a manufacturer and supplier of computers based in USA and supplies its goods all over the world. As a part of this supply, 'A' is also required to provide customer care service to its customers to address their queries and complains related to the said supply of computers. 'A' decides to outsource the task of providing customer care services to a BPO firm, 'B'. 'B' provides customer care service to 'A' by interacting with the customers of 'A' and addressing / processing their queries / complains. 'B' charges 'A' for this service. 'B' is involved in supply of main service 'customer care service' to 'A', and therefore, ''B' is not an intermediary. Note:- The above example are only indicative and not exhaustive. The example are also generic in nature and should not be interpreted to mean that the service categories mentioned therein are inherently either intermediary services or otherwise. Whether or not, a specific service would fall under intermediary services within the meaning of section 2(13) of the IGST Act. would depend upon the facts of the specific case. While examining the facts of the case and the terms of contract, the basic characteristics of intermedia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....including resale of media space, to the foreign client on principal-to-principal basis as detailed above and does not fulfil the criteria of "intermediary" under section 2(13) of IGST Act. Thus, the same cannot be considered as "intermediary" in such a scenario and accordingly, the place of supply in the instant matter cannot be linked with the location of supplier of services in terms of section 13(8)(b) of the IGST Act. Issue 2:- Whether the representative of foreign client in India or the target audience of the advertisement in India can be considered as the "recipient" of the services being supplied by the advertising company under section 2(93) of CGST Act? Clarification * The "recipient" of the services means the person who is liable to pay consideration where a consideration is payable for the supply of goods or services or both. [ Section 2(93)(a) of the CGST Act ] * The foreign client is liable to pay the consideration to advertising company for the supply of advertising and not the consumers or the target audience that watches the advertisement in India. * in this case, even if a representative of the said foreign client based in India, including a subsidiary o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ario, the supply of advertising services does not require physical presence of the recipient (foreign client or representative or a person acting on his behalf) with the advertising company for availing the said advertising services. Thus, the said supply of advertising services cannot be considered as being covered under section 13(3)(b) of the IGST Act for being considered as the services actually performed in India in terms of the said section. * Accordingly, it is clarified that the place of supply of advertising services in such cases can neither be determined as per the provision of section 13(3)(a) nor as per the provisions of section 13(3)(b) of IGST Act. 3. Clarification on place of supply of data hosting services provided by service providers located in India to cloud computing service providers located outside India. [ Circular No. 232/26/2024-GST datd 10.09.2024 ] Issue 1. Whether data hosting service provider qualifies as 'Intermediary' between the cloud computing service provider and their end customers /users / subscribers as per Section 2(13) of the IGST Act and whether the services provided by data hosting service provider to cloud computing service providers ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... services provided by you as an intermediary to the principal. [refer the FAQ for GST on IT/ITES Qus.13] * Example 4:- Would intermediary services provided to an off-shore client and services provided by a banking company to its offshore account holders be treated as an intra-State supply or an inter-State supply for payment of GST? * Under clause (b) of Section 13(8) of the IGST Act, 2017 the place of supply of such services is the location of the provider of services. As the location of supplier and place of supply are in same State, such supplies will be treated as intra-State supply and Central tax and State tax or Union territory tax, as the case may be, will be payable. [refer the FAQ on on Banking, Insurance and Stock Brokers Sector Qus.25] * Example 5:- Are services supplied by a bank to its branch/head-office outside India, which are neither intermediary services nor services to account holders, taxable under GST? * GST is a destination based consumption tax. Such services provided by a bank or the branch of a foreign bank in India to its offshore branch/head-office, which are neither intermediary services nor services to account holders, are inter-State supply of ....