Controversies in place of supply of Intermediary services under GST

The place of supply (POS) provisions under GST determine whether a transaction is a domestic or an international supply, and also determine the applicable tax rate for the supply. The place of supply of intermediary services, in particular, has been a subject of controversy under the GST regime.

Intermediary services refer to services provided by a person located in India to a person located outside India, or vice versa, in the course of or for the facilitation of an intermediary supply of goods or services. An intermediary supply is a supply of goods or services made by a supplier to an intermediary, who in turn supplies the same to another person.

There has been controversy over the place of supply of intermediary services, as the location of the intermediary can impact the tax treatment of the supply. Some of the controversies include:

1. Whether the intermediary services should be treated as an export or an import of services: If the intermediary is located in India and provides services to a person located outside India, the supply can be considered as an export of services, and no GST would be applicable. However, if the intermediary is located outside India and provides services to a person in India, the supply would be considered as an import of services, and GST would be applicable.

2. Determination of the location of the intermediary: It can be difficult to determine the location of the intermediary in some cases, particularly if the intermediary is a non-resident or if the services are provided through a digital platform. The location of the intermediary can impact the POS of the supply and the applicable tax rate.

3. Impact of the place of supply of the underlying supply: The POS of the underlying supply can also impact the POS of the intermediary services. For example, if the underlying supply is considered as an export of goods or services, the intermediary services provided in relation to that supply may also be treated as an export of services.

In conclusion, the place of supply of intermediary services has been a subject of controversy under the GST regime due to the complex nature of these transactions. The GST council has issued guidance and clarifications on the issue to help resolve some of the controversies and ensure consistent tax treatment of these supplies.

Impact of the place of supply of the underlying supply on the place of supply of intermediary services

The place of supply (POS) of intermediary services under GST can be impacted by the place of supply of the underlying supply. The underlying supply refers to the goods or services that are being supplied by the supplier to the ultimate recipient, and for which the intermediary services are being provided.

In general, if the underlying supply is an export of goods or services, the intermediary services provided in relation to that supply may also be treated as an export of services. This means that the POS of the intermediary services would be determined based on the location of the recipient of the underlying supply, and the supply may be exempt from GST.

Similarly, if the underlying supply is an import of goods or services, the intermediary services provided in relation to that supply may also be treated as an import of services. This means that the POS of the intermediary services would be determined based on the location of the recipient of the underlying supply, and the supply may be subject to GST.

However, the impact of the place of supply of the underlying supply on the place of supply of intermediary services is not always straightforward. In some cases, it may be necessary to consider the nature and extent of the involvement of the intermediary in the underlying supply, as well as the terms of the contract between the intermediary and the supplier and/or the recipient.

The GST law provides certain presumptions regarding the place of supply of intermediary services, which can help determine the correct POS. For example, if the intermediary is a resident of India and is providing intermediary services to a recipient located outside India, the POS is deemed to be outside India, and the supply may be exempt from GST.

In conclusion, the place of supply of the underlying supply can impact the place of supply of intermediary services under GST. It is important to carefully analyze the nature of the transaction and the applicable provisions of the GST law to determine the correct POS and the applicable tax treatment.

FAQs

Here are some frequently asked questions related to the controversies in the place of supply of intermediary services under GST:

Q: What are intermediary services under GST?

A: Intermediary services refer to services provided by a person located in India to a person located outside India, or vice versa, in the course of or for the facilitation of an intermediary supply of goods or services.

Q: How does the place of supply of intermediary services impact the tax treatment?

A: The place of supply of intermediary services can impact the tax treatment, as it can determine whether the supply is a domestic or an international supply, and also determine the applicable tax rate for the supply.

Q: What is the controversy surrounding the place of supply of intermediary services?

A: The controversy surrounding the place of supply of intermediary services arises from the fact that the location of the intermediary can impact the tax treatment of the supply, and it can be difficult to determine the location of the intermediary in some cases.

Q: How is the location of the intermediary determined under GST?

A: The location of the intermediary is generally determined based on the address of the intermediary as per the records of the supplier of services. However, there can be challenges in determining the location of the intermediary in some cases, particularly if the intermediary is a non-resident or if the services are provided through a digital platform.

Q: What is the impact of the place of supply of the underlying supply on the place of supply of intermediary services?

A: The place of supply of the underlying supply can also impact the place of supply of intermediary services. For example, if the underlying supply is considered as an export of goods or services, the intermediary services provided in relation to that supply may also be treated as an export of services.

Q: What guidance has the GST council issued on the place of supply of intermediary services?

A: The GST council has issued guidance and clarifications on the issue to help resolve some of the controversies and ensure consistent tax treatment of these supplies. For example, the GST council has clarified that if the intermediary is merely facilitating the supply and is not a party to the underlying supply, the place of supply of the intermediary services would be the location of the supplier of the underlying supply.