Intermediary Services under GST – An Analysis

Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services throughout India. GST is an attempt to bring uniformity in the taxation system and remove the cascading effect of taxes. The government has introduced various provisions to make tax compliance easier for taxpayers. One such provision is "intermediary services."

What are Intermediary Services?

Intermediary services refer to services that an intermediary, located in India or abroad, provides to a person outside of India. Intermediary services are deemed to have been provided in India, even if the intermediary is located outside India.

Intermediary services have been defined under the GST Act as services that are "arranging or facilitating the supply of goods or services or both between two or more persons." These services can be provided by various intermediaries such as commission agents, brokers, dealers, and any other person who arranges or facilitates the supply of goods or services.

Intermediary Services under GST

Intermediary services are taxable under GST. However, they are subject to certain conditions and exemptions. The following are some of the important provisions related to intermediary services under GST:

1. Place of Supply

The place of supply for intermediary services is the location of the supplier. If the intermediary is located outside India, the place of supply will be deemed to be in India. This means that the intermediary will have to register under GST in India if the aggregate turnover exceeds the threshold limit of Rs. 20 lakhs.

2. GST Rate

The GST rate for intermediary services is 18%. However, if the intermediary is located outside India and the services are being provided to a person outside India, the services will be treated as export of services and will be exempt from GST.

3. Input Tax Credit

The intermediary can claim input tax credit (ITC) for the taxes paid on goods and services used for providing the intermediary services. However, ITC cannot be claimed on goods and services used for making exempt supplies.

4. Exemptions

Intermediary services provided by an overseas supplier to a person outside India are exempt from GST. Similarly, intermediary services provided by an intermediary located in India to a person outside India are also exempt from GST.

Conclusion

Intermediary services are an important aspect of the GST system. They play a critical role in facilitating the supply of goods and services between two or more persons. The introduction of the GST has made it easier for intermediaries to operate in a transparent and efficient manner. However, intermediaries need to be aware of the provisions related to GST and comply with the rules to avoid penalties and legal consequences.