Agents of foreign firms seek GST exemption, cite govt body clarifications

Agents providing various services to foreign companies are quoting the government’s own Tax Research Unit’s (TRU’s) clarification in asking for exempting them from the 18 per cent goods and services tax (GST).

These providers, indenting agents in technical parlance, went to the Gujarat high court against the GST levied on them. On the reasoning that they provide services which are export in nature. While such agents located outside India are exempt from GST, those providing these services such as marketing or sales promotion, etc, through offices in India are taxed.

As the case continued, the TRU (of the Central Board of Indirect Taxes and Customs) said the tax should not be levied on these services. The clarifications were issued as office memoranda, regarding place of supply rules of intermediary services providers under GST.

These clarifications call  for amending Section 13 (8) of the Integrated GST Act, which says the place of supply in cases where these services are offered will be the location of the supplier of services itself.

The clarifications say: "In the case of B2B (business to business) intermediary service, the place of supply where location of supplier or location of recipient of service is outside India is presently governed by section 13(8)...may be changed to location of the service recipient.”

Abhishek Rastogi, who is arguing the case in the Gujarat HC and is partner at Khaitan and Co, said the place of provision for intermediary services makes these transactions taxable even when the recipient is outside India and payment is received in foreign exchange.

“These provisions create hardship for Indian service exporters. If they start operations from outside India, they can save on the 18 per cent GST,” he said.