QUESTION

 Mr. A is a regd person (Individual) having commission income as an intermediary services provider. He receives commission from a company “B” in USA for arranging buyer of their products in India and outside India. Prior to notification no-20/IGST(rate)/30.09.2020 Mr. A was paying gst on commission recd from Company B for arranging buyer anywhere in the world i.e in India or outside India as intermediary service provider. Mr. A is in the business since last more than 10 years. Now in one of the deal he got commission from company “B”(USA) for sale made by Company “B”(USA) to a Company “C” in Singapore. Company “C” (Singapore) purchased goods from Company ”B”(USA) for his customer in India. Company “C”(Singapore) instruct Company “B”(USA) to send goods to India(Bill to Singapore and ship to India).All the facts of the transaction was known to all the three parties to the deal before execution. LC was opened in Singapore. Payment was made from Singapore (Company “C” to Company “B”) to USA. Bill of Lading was issued on the direction of Company “C” (Singapore) having detail of importer as Indian customer. Goods were received in India. Mr. A GOT COMMISSION FROM COMPANY “B” (USA) AT THE PRICE AT WHICH COMPANY “B” SOLD GOODS TO COMPANY”C”(SINGAPORE). ALTHOUGH COMPANY “C”(SINGAPORE) SOLD GOODS TO HIS CUSTOMER IN INDIA AFTER ADDING HIS MARGIN. My question is whether the commission earned by Mr. A will qualify for exemption vide notification no-20/IGST(rate)/30.09.2020(entry no-12AA).Location of supplier and Location of recipient of goods for his(Mr. A) transaction is out of taxable territory although goods were imported in India through next transaction ie Singapore to India.Mr. A in no where connected with transaction from Singhapore to India although it was khown to him at the time of export from USA

ANSWER

Facts of the case:  Intermediary got commission from company “B”(USA) for sale made by Company “B”(USA) to a Company “C” in Singapore. Company “C” (Singapore) purchased goods from Company ”B”(USA) for his customer in India. Company “C”(Singapore) instruct Company “B”(USA) to send goods to India (Bill to Singapore and ship to India). Goods were received in India. Mr. A GOT COMMISSION FROM COMPANY “B” (USA) AT THE PRICE AT WHICH COMPANY “B” SOLD GOODS TO COMPANY”C”(SINGAPORE). Appliacbility of GST on commission earned by Mr. A.

Law Applicable:
Notification 09/2017 IGST (Rate)

12AA

Heading 9961

Services provided by an intermediary when location of both supplier and recipient of goods is outside the taxable territory.

Nil

Following documents shall be maintained for a minimum duration of five years:

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'



SECTION 13 of IGST Act -
Place of supply of services where location of supplier or location of recipient is outside India
(8) The place of supply of the following services shall be the location of the supplier of services, namely:''
               (b) intermediary services;

SECTION 2 of IGST Act
(6) 'export of services' means the supply of any service when,''
   (i) the supplier of service is located in India;
   (ii) the recipient of service is located outside India;
   (iii) the place of supply of service is outside India;
   (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; or in Indian rupees wherever permitted by the Reserve Bank of India and
   (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

SECTION 10 of IGST Act
(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.

 Interpretation:In case of Intermediary services where the location of Supplier or Recipient is located outside India, the place of supply of service as per Section 13 of IGST Act is the location of the Supplier of Services, i.e., of the Intermediary.
In the given case, Place of Supply will be the location of Intermediary, i.e, India.

Further for a supply to be export, all the conditions of Section 2(6) should be fulfilled. As the place of supply is in India therefore this cannot be considered as Export of Service. Hence GST will be applicable.
However S.No. 12AA of N/N 09/2017 IGST (rate) exempts Services provided by an intermediary when location of both supplier and recipient of goods is outside the taxable territory.
 
In your case location of supplier of goods is USA i.e. outside India and location of recipient of goods in case of third party transaction is Singapore as per section 10(b) of IGST i.e. also outside India. Therefore as both supplier and recipient of goods is outside India, hence the same is exempted vide s.no. 12AA of Notification 09/2017 IGST (Rate).

Conclusion:GST will not be applicable on such supply of Intermediary service when both location of supplier and recipient of goods is outside India as the same is exempted vide s.no. 12AA of Notification 09/2017 IGST (Rate)

(Reply dt.15-06-2020)