Classification and liability of GST

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This discussion explores the Goods and Services Tax (GST) implications for an Indian subsidiary that facilitates logistics for its foreign parent company. The core issue is how to classify the services provided: as an intermediary, transportation of goods, or a trading of services. While the pure agent status is considered, it's noted that not all conditions are met. The discussion also touches upon whether these transactions qualify as exports of services, referencing relevant circulars regarding supplies between distinct persons.

VRUSHAL

VRUSHAL (Querist)
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21 July 2022 Hello Sir,

our company is Indian Subsidiary of Foreign Company. Our Indian Company facilitated to parent company in logistic of goods and for which air/sea freight bill received by Indian Company on his own name. we reimburse the same from parent Company on monthly basis.

What is the implication in GST ? it is require to pay GST by classify Indian company as Intermediary under Section 13 (8), or it is transportation of goods under section 13 (9) and classified as trading of services i.e. Purchase of Service by Indian Company and sell to parent Company.

Pure Agent is not applicable as all the condition is not satisfied regarding Pure Agent.

Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 It will fall under pure agent in view of reimbursement without adding any profit.

If you don't agree with me it's any supply of service by a company incorporated in India to its parent company , located in any other country and not incorporated under the laws of the said country, shall also be considered as supply between establishments of distinct persons and cannot be treated as export of service.

VRUSHAL

VRUSHAL (Querist)
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26 July 2022 Thank you Sir for reply, Company had not fulfill condition of Pure agent , as per Rule 33 (iii) i.e. "The nature of supply procured by the Pure Agent from the third party as a Pure Agent of the recipient are in addition to the services, he (Pure Agent) supplies on his own."

For sale of Service, both the company is incorporated as per law of respective country (circular 161/17/2021-GST ) "supply of services by a subsidiary/ sister concern/ group concern, etc. of a
foreign company, which is incorporated in India under the Companies Act, 2013 (and thus
qualifies as a ‘company’ in India as per Companies Act), to the establishments of the said
foreign company located outside India (incorporated outside India), would not be barred by the
condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for being considered
as export of services, as it would not be treated as supply between merely establishments of
distinct persons under Explanation 1 of section 8 of IGST Act 2017 ."

However, regarding classification as Intermediary I am little bit confuse.

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