Services by way of arranging or facilitating sales of goods for various overseas suppliers, qualifies as an ‘intermediary' as defined under Section 2(13) of the IGST Act, 2017 instead of ‘Export of service’.

Facts: The applicant is an independent facilitator supplying services at his own risk without being appointed as an agent of the overseas suppliers or the buyers. The applicant is facilitating supply of goods by an overseas suppliers (located outside India) to overseas/ Indian buyers, in this process, the Applicant procures purchase order for supply of goods from the buyers and then connects such prospective buyers with the overseas suppliers. The overseas supplier of goods thereafter dispatches the goods directly to the buyers. The Applicant receives consideration in the form of commission in foreign exchange from the overseas supplier.

Issue: whether the supply of services by the applicant for facilitating sale of goods by overseas supplier to prospective buyers qualify as ‘export of service' or not.

Held: The Authority for Advance Rulings, West Bengal held as under-

• Considering the modus operandi of the business as submitted by the applicant, the applicant is located in India and the recipient of the service i.e., the overseas supplier of goods to whom the applicant provides services is located outside India. However, the nature of activities going to be undertaken by the applicant towards arranging or facilitating supply of goods envisages the services closely akin to the services provided by an ‘intermediary’ as defined in clause (13) of section 2 of the IGST Act, 2017.
• According to clause (13) of section 2 of the IGST, an intermediary is:
  (i) a broker, an agent or any other person;
  (ii) who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons; and
  (iii) who doesn’t supply such goods or services or both or securities on his own account.
• It appears that the applicant being supplier of services by way of arranging or facilitating sales of goods for various overseas suppliers and admittedly the same is not being done on his own account, satisfies all the conditions to be an intermediary as defined in clause (13) of section 2 of the IGST Act, 2017.
• The applicant being an ‘intermediary’ the place of supply shall be determined under subsection (8) of section 13 of IGST Act, 2017 which shall be the location of the supplier of services i.e., in West Bengal for the present case. As a result, the supply shall be treated as an intra-State supply in terms of sub-section (2) of section 8 of the IGST Act, 2017 and tax will be levied accordingly. This transaction will, therefore, not be covered within the definition of export of services as provided in Section 2(6) of IGST Act, 2017 as it is not satisfying one of the conditions of place of supply being outside India, as enumerated in Section 2(6)(iii) of the IGST Act, 2017 and consequently shall not be treated as zero-rated supply as provided in section 16 of the IGST Act, 2017.

Therefore, the West Bengal AAR held that the services of the applicant by way of arranging sales of goods shall not be considered as ‘export of service’ as defined under clause (6) of section 2 of the IGST Act, 2017.

To read the complete judgment 2021 Taxo.online 1419