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Gst on foreign commission

Kanav Chadda (Director) (23 Points)

08 September 2018

We have a private limited company registered in India.

We helped a foreign company sell their goods in India and Bangladesh in exchange of commission payable to us.

Please let us know if we can issue an Export Invoice (services) to the foreign company for the same against LUT without payment of IGST and receive commission from them ?

Also will this attract any reverse charge or any other liability under GST ?

thanks

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4 Replies

Pankaj Rawat (GST Practitioner) (55037 Points)
Replied 08 September 2018

what kind of services you are providing to foreign co..

Rohit Tibrewal (Student & Senior Accountant) (3193 Points)
Replied 08 September 2018

To say a service is exported:
a) The person providing service must be located in India
b) The person receiving service must be located outside India
c) The place of supply of service is outside India
d) The payment has been received by the provider of service in foreign currency, (Currency other than INR)
e) The provider and receiver of service must also be unique to each other.
If we talk about the place of supply for these exported services, the place of supply of services will be the location of the receiver.
With the new order of AAR, in case services are considered as export based on the above 5 points, you will have to check if these services are provided as intermediary services or not.
To simplify further, if the service is provided outside India, to a a person who is also located outside India and the payment for this service is received in foreign currency we will have to re-check some facts. If the service is provided as an Intermediary service, the place of supply will be the place of the intermediary, which is in India.
Intermediaries are brokers, agents or any other person who arranges or helps in the supply of goods or services or both, or securities, between two or more persons. These activities by the agents are not done for themselves but are for other people (Principal).
To decide if the service provider is an Intermediary or not, we could check if:
a) The payments for the service provided are based on the coverage of the provider. (No of customers reached, percentage of target met, new leads generated, etc)
b) Permissions from the service receiver is required to do activities connected to the provision of this service.

In case if these services are concluded to be provided by the intermediary, the place of supply will be that of the intermediary. Thus, if a person provides services to parties outside India and acts like an Intermediary/middleman this would not be an Export and will attract GST.

In good faith, it will be right to review the arrangements made between parties and be clear about the GST implications to avoid any future hurdles.

Durgesh Mourya (219 Points)
Replied 08 September 2018

You Need to pay IGST on Selling the Goods

Pankaj Rawat (GST Practitioner) (55037 Points)
Replied 08 September 2018

As to your query sound you fall under the Intermediatory services
sec 2(13) of IGST Act, intermediary is a broker or an agent who arranges or the supply of goods or services or securities, between two or more persons. But an intermediary shouldn’t supply such goods or services or securities on his own account.

And

As per section 13(8) in case of intermediatary service the place of supply is supplier place

Hence CGST/SGST is applicable