GST on services by way of arranging sales of goods outside India- ‘Not’ export of services
Name of applicant: |
Teretex Trading Private Limited |
Appeal No.: |
Order No. 3/WBAAR/2021-22 |
Ruling pronounced by: |
Authority for Advance Ruling, West Bengal |
Date of Ruling: |
28-06-2021 |
Question before Authority
Whether supply of services by way of arranging sales of goods to the recipient located outside India shall be considered as ‘export of services’ or not?
Brief Facts:
- The applicant procures purchase order for supply of goods from the buyers located in India. He then connects such prospective buyers with the suppliers of goods who are located outside the country. The supplier of goods thereafter despatches the goods directly to the buyers.
- The applicant can neither change the nature and value of supply of goods nor he holds the title of goods at any point of time during the entire transaction. Further, the value of supply of services as provided by him is claimed to be based on an agreed percentage separately identifiable.
- The applicant submits that being an independent service provider, he is going to undertake supply of services at his own risk and cost without being appointed as an agent by the supplier or by the recipient of goods.
- He also submitted that he doesn’t represent the party for whom he is procuring the order for supply of goods nor has any authority to negotiate at the time of procuring order for them.
- The applicant is of the opinion that the services going to be undertaken by him shall be termed as ‘export of services’ as per clause (6) of section 2 of the IGST Act, 2017 and therefore, he has no liability to pay tax on such supply of services.
Observation of Authority:
- We find that the supplier of service i.e. 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.
- The term ‘intermediary’ as per the aforesaid clause 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.
- It therefore 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 IGST Act, 2017.
- The place of supply is determined u/s 13 of the IGST Act, 2017 where location of supplier or location of recipient is outside India. In the present case, the applicant being supplier of services is located in India and the recipient of services being located outside India attracts the provisions of the aforesaid section of the Act.
- Since, the applicant is found to be an ‘intermediary’ as defined in clause (13) of section 2 of the IGST Act, 2017, so, the place of supply shall be determined under sub-section (8) of section 13 of the IGST Act, 2017 which shall be the location of the supplier of services i.e. West Bengal for the present case.
- As a result, the supply shall be treated as intra-state supply in terms of sub-section (2) of section 8 of the IGST Act, 2017 and tax will be levied accordingly.
Ruling:
The services of the applicant by way of arranging sales of goods shall not be considered as ‘export of services’ as defined under clause (6) of section 2 of the IGST Act, 2017 and consequently shall not be treated as zero-rated supply.