PQR, Switzerland is the parent company of XYZ(India). The services provided by XYZ(India) to PQR, Switzerland, are mainly in connection with ‘Information Technology assistance services relating to system and knowledge engineering. Further, XYZ also undertakes to provide services in connection with providing infrastructure support for global delivery centre which includes services to other separate legal entities / group companies of XYZ. In this connection, instructions are received by XYZ directly from the group companies and not through PQR. Payment against the same received by XYZ from PQR in foreign currency including for the services supplied to other separate legal entities/ group companies of XYZ. Subsequently, PQR is recovering the amount from the respective group companies against the amount initially paid to XYZ. Is XYZ required to pay GST on the amount recovered from PQR? As per the recent circular no. 159 of CBIC, following are my views:
As per the circular, the use of the expression “arranges or facilitates” in the definition of “intermediary” suggests a subsidiary role for the intermediary. It must arrange or facilitate some other supply, which is the main supply and does not himself provides the main supply. Thus, the role of intermediary is only supportive. In cases wherein the person supplies the main supply, either fully or partly, on principal to principal basis, the said supply cannot be covered under the scope of “intermediary”. Also the Illustration No.4 is more or less fitting in to the present query. Therefore, in my view, this will not be treated as intermediary service and will be treated as export of service and therefore XYZ is not required to pay GST on the amount received from PQR. Views / Guidance from the experts please.
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