Intermediary or as we call them agent has been defined in IGST act as:
““intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account”
Thus, it is a very wide definition and covered almost every type of agent, intermediary, broker who doesn’t deals on his own account and get’s a consideration.
Section 13(8)(b) of the IGST Act defines place of supply for such services as under:
“The place of supply of the following services shall be the location of the supplier of services,”
Now, with advancement of technology many people from India started to make deals between persons living in different countries.
For eg: A broker sitting in India could make a deal between two businessmen in Japan or USA and could earn brokerage but due to section 13(8)(b), same won’t be considered as export of service even though the recipient of service is situated outside India.
Thus, because of the above provision it was becoming very difficult and costly for Indian brokers because actually they were doing export of service and earning foreign exchange but they were not receiving benefit of same like other service and they couldn’t even charge GST from recipient and the recipient won’t pay any tax over and above normal charges as the same would add to his cost and ultimately this 18% GST was becoming a part of cost of the intermediary.
There were various cases filed against the above provision but none of them were upheld.
Finally CBIC vide notification 20/2019 – Integrated Tax (Rate) dt. 30.09.2019 provided this relaxation wherein the service of intermediary wherein location of both the buyer and seller was located outside India, was made liable to Nil rate of GST.
The above amendment has been made to heading 9961 wherein various documents needs to be maintained for atleast 5 years to take benefit of such Nil tax rate which are as under:
“1) Copy of Bill of Lading
2) Copy of executed contract between Supplier/Seller and Receiver/Buyer of goods
3) Copy of commission debit note raised by an intermediary service provider in taxable territory from service recipient located in nontaxable territory.
4) Copy of certificate of origin issued by service recipient located in nontaxable territory.
5) Declaration letter from an intermediary service provider in taxable territory on company letter head confirming that commission debit note raised relates to contract when both supplier and receiver of goods are outside the taxable territory”;”
Thus, if all above conditions are fulfilled you can charge Nil tax rate on above transaction. It is worthwhile to mention here that this service is still not covered under “zero rated supply” i.e. this is still not considered as export of service and you cannot claim any benefit of export for such service.
To read the notification CLICK HERE.
Further, it is important to mention here that although the services are being provided to recipient outside India but since the place of supply under the GST definition would be in India, hence benefit of export won’t be available.
