GST treatment of Outsourced Export services.

Query:

We are an Indian service providers working as Intellectual Peoperty mediators.

How we work:
we connect clients and service providers across the globe.

Example: One US client need some patent/trademark registration in China.

US client will approach us for the task. We will connect with some china based IP attorney regarding this task. The US client pays entire amount (our professional fees, China Attorny fees and China Govt fees) to us.

We keep our professional fees and pay the portion of China Attorny fees and China Govt fees to the Chinese Attorny for their processing).

In this scenerio. How we will raise the invoice in compliance with GST?

Does this kind of arrangement falls under 'Intermediary'?

Should invoice contain entire amount received from US client or it should contain only our professional Fees?

What should be the GST treatment?

Kindly guide.

Hey Deepak! Your case involves cross-border services with a bit of complexity due to your role as a facilitator. Here's the GST treatment breakdown for your scenario:

1. Are you an Intermediary?

Yes, you act as an Intermediary under GST law because you facilitate the provision of services between the US client (recipient) and the Chinese attorney (service provider). According to GST, an intermediary arranges or facilitates the supply of goods or services between two other persons but does not supply the goods or services on his own account.

2. Invoice Treatment

You should raise the invoice only for your professional fees (the commission or facilitation charges you earn).
The amounts collected on behalf of the China attorney and government fees should not be included in your invoice as your supply value because you are merely passing that on to a third party.

3. GST on Your Professional Fees

Your supply is the intermediary service (your professional fees).
The place of supply for intermediary services where the supplier is in India and the recipient is outside India is treated as export of services under GST, which means:
- Your supply (professional fees) qualifies as zero-rated supply under IGST Act.
- You can claim input tax credit (ITC) on your inputs/input services used to provide the intermediary service.
- You must either export the service with LUT/bond or pay IGST on your professional fees.

4. Payment to Chinese Attorney

The amounts paid to the China attorney and government fees are not your supply; they are reimbursements or payments made on behalf of your client.
You do not charge GST on these amounts.
Ensure proper accounting and documentation to show these are pass-through payments.

Summary Table:

Particulars	GST Treatment
Invoice raised to US client	Only your professional fees
GST on your professional fees	Zero-rated export of service
Amount paid to China attorney	Not part of your taxable supply
Documentation	Separate accounting for pass-through payments, agreements clearly stating roles

Additional Points:

Maintain clear contracts mentioning you are acting as an intermediary and pass-through nature of foreign attorney fees.
Ensure compliance with Foreign Exchange Management Act (FEMA) while receiving and making payments abroad.