GST: Arranging Sale of Goods not to be considered as ‘Export of Service’, rules AAR [Read Order]

The West Bengal Authority of Advance Ruling (AAR) ruled that the arranging sales of goods should not be considered as ‘export of service’.

The applicant, Teretex Trading Private Limited is an independent service provider, he is going to undertake supply of services at his own risk and cost without being appointed as an agent by the supplier or by the recipient of goods.

The applicant does not represent the party for whom he is procuring the order for supply of goods nor has any authority to negotiate at the time of procuring order for them. He does not assume any obligation either on behalf of the supplier or on behalf of the recipient of the goods.

The applicant has categorically denied his role of an agent or representative but has admitted that he arranges or facilitates supply of goods for the party for whom he procures order to supply goods. The applicant has submitted that in some industries, such as Textiles and Chemicals, there is the normal practice of selling goods through independent mediator/service provider without being appointed him as an agent against commission at the rate normally prevalent in the market which is generally 1% or 2% depending on the volume of trade.

Further, in other industries, the mediator/service provider may arrange sales at his own risk and cost without being appointed as an agent. Rate of commission in such cases is also followed by certain market norms and negotiable between the overseas seller of goods and the service provider who arranges the sales.

The applicant has sought the advance ruling on the issue whether supply of services by the applicant by way of arranging sales of goods to the recipient located outside the country shall be considered as ‘export of services’ or not.

The Coram of Sushmita Bhattacharya and Jyoti Banik noted that the place of supply is determined under section 13 of the IGST Act, 2017 where location of supplier or location of recipient is outside India. In the present case, the applicant being the supplier of services is located in India and the recipient of services being located outside the country attracts the provisions of the aforesaid section of the Act ibid. We have already discussed that the applicant is found to be an ‘intermediary’ as defined in clause (13) of section 2 of the IGST Act, 2017.So, the place of supply shall be determined under sub­section (8) of section 13 of IGST Act, 2017 which shall be the location of the supplier of services i.e., in West Bengal for the present case.

The AAR ruled that the supply shall be treated as an intra-State supply in terms of sub-section (2) of section 8 of the IGST Act, 2017 and tax will be levied accordingly. This transaction will, therefore, not be covered within the definition of export of services as provided in Section 2(6) of IGST Act, 2017 as it is not satisfying one of the conditions of place of supply being outside India, as enumerated in Section 2(6)(iii) of the IGST Act, 2017 and consequently shall not be treated as zero-rated supply as provided in section 16 of the IGST Act, 2017.

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