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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 ]
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.... case • As per para 5 of Circular No. 230/24/2024-GST Dated 10.09.2024 "However, there may be cases where the advertising company located in India merely acts as an agent of the foreign client in engaging with the media owner for providing media space 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 ....
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....such goods or services or both or securities on his own account." • The concept of 'intermediary' was borrowed in GST from the Service Tax Regime. The definition of 'intermediary' in the Service Tax law as given in Rule 2(f) of Place of Provision of Services Rules, 2012 issued vide notification No. 28/2012-ST, dated 20-6-2012 was as follows: "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision 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 prerequisite....
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....ot include a person who supplies such goods or services or both or securities on his own account". Use of word "such" in the definition with reference to supply of goods or services refers to the main supply of goods or services or both, or securities, between two or more persons, which are arranged or facilitated by the intermediary. It implies that 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". • Sub-contracting for a service is not an intermediary service:- An important 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 Maintenanc....
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....e from other service providers in India. 'Q' contacts 'R', who is in business of providing such insurance claims processing service, and arranges supply of insurance claims processing service by 'R' to 'P'. 'Q' charges P a commission or service charge of 1% of the contract value of insurance claims processing service provided by 'R' to 'P'. In such a case, main supply of insurance claims processing service is between 'P' and 'R', while 'Q' is merely arranging or facilitating the supply of services between 'P' and 'R', and not himself providing the main supply of services. Accordingly, in this case, 'Q' acts as an intermediary as per definition of section 2(13) of the IGST Act. Example 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 addre....
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....ient for the above advertising services and the payments of the same is received from the foreign client in foreign exchange. • Second - With the media company to procure media space for display of the advertisement and to monitor campaign progress based on data shared by the media company. The media company bills the advertising agency and the payment for same is made by the advertising agency to the media company. • The agreement is in the nature of two distinct principal-to-principal supplies and no agreement of supply of services exists between the Media company and the foreign client. The advertising company is not acting as an agent but has been contracted by the client to procure and provide certain services. The advertising agency is providing the services to the client on its own account. • The advertising company is involved in the main supply of advertising services, 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 consid....
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.... section 13(3) of the IGST Act? Clarification • The place of supply of performance based services is provided in section 13(3) of IGST Act. The provisions of clause (a) of the said sub-section pertain to the services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services. However, in the instant matter, there does not appear to be any such involvement of goods which are required to be physically available with supplier of advertising services. Therefore, the said provisions of clause (a) of the said sub-section cannot be made applicable for determination of place of supply of advertising services. • Further, section 13(3)(b) of IGST Act provides that the place of supply shall be the location where the services are actually performed in case, where, a. services are supplied to an individual, b. represented either as the recipient of services or a person acting on behalf of the recipient, and c. which requires the physical presence of the recipient or the person acting on his be....
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....vices. [ M/s. Ernst And Young Limited Versus Additional Commissioner, CGST Appeals -II, Delhi And Anr. 2023 (3) TMI 1117 - Delhi High Court ] • The GST Appellate Tribunal (GSTAT) held that procurement support services provided by a foreign affiliate to an Indian recipient qualify as an import of services and not as intermediary services under the IGST Act. The Tribunal observed that the foreign entity was undertaking substantive procurement activities in its own capacity as an independent contractor and was not merely arranging or facilitating supplies between two other parties. Consequently, the services could not be classified as intermediary services. [ M/s. Dow Chemical International Private Ltd., Through Its Director, Shri Rahunathangavel Versus Commissioner Of State Tax, Mazgaon, Mumbai Asheesh Sharma & Ors. 2026 (6) TMI 375 - GSTAT New Delhi-[PB] ] Examples - • Example 1:- ABC Pvt. Ltd., New Delhi, Provides support services to foreign customers in relation to procuring goods from India. The company identifies the prospective vendor, reveiws product quality and pricing and then shares the vendor details the fore....
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....ax, 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 services between distinct establishments [as per Section 7(5)(a) read with Explanation to Section 8 of the IGST Act, 2017], and will be taxable in India, as the location of the supplier is in India and the place of supply is outside India. Such services will not be treated as exports in view of the sub-clause (v) of Section 2(6) of the IGST Act, 2017 read with Explanation 1 to Section 8 of the IGST Act, 2017. [refer the FAQ on on Banking, Insurance and Stock Brokers Sector Qus.54] • Example 6:- Do stock brokers fall in the definition of "intermediary" under Section....