I am agent of a Taiwan based company and selling their textile machines in North India.The machines are invoiced direct by Taiwan company direct to customers in USD and customers import the machines after paying custom duty(IGST) and I get commission from that Taiwan based company in USDollars. For getting commission I raise a commission invoice to Taiwan based company but that being a Taiwan company I can not charge any GST from Taiwan company in my invoice invoice to Taiwan Company as that company is not subject to Indian taxation laws. Why should then I be paying GST(Service tax) as I can not raise invoice for the same to anybody.
Hi
Under GST, such services are intermediary services which are chargeable to GST@18%. There's no threshold limit applicable.
You need to issue an invoice to the Taiwan company. If they are paying you a fixed amount and not paying GST in addition, you simply need to do reverse calculation of GST according to the amount so received.
Hi,
Hope you are doing well !!
The service you provide is that of an intermediary.
As per 2(13) of the IGST Act, 2017, “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both, or securities on his own account.
As per Section 13 (8) (b) of the same Act, the place of supply of “intermediary services” shall be the location of the supplier of services. Therefore, the supply of the intermediary service is in the taxable territory and so the service is taxable and as a service provider, you have to discharge the tax liability by reverse calculation.
Thanks & Regards,
Payal Chhajed
Hi Thanks for your quick reply. So I have to pay the 18% GST from my own pocket in addition to 30% income tax.Is it legally maintainable in a court of law. Also pls advise what items I am entitled to in reverse charge charge calculation
Hii
in your above mentioned case you have 2 options
1 pay igst on export of services and claim refund
2 Export services under LUT (without payment of IGST) and claim refund of Input credit (if any)
in both ways you get refund thus this is not your cost although your fund is blocked thus interest loss is there.
Hi Thanks for your reply But the debatable point is that does it qualify as Export of services. According to some this does not qualify as export.
Indeed, yes.
Ideally, GST is to be recovered from the service receiver. In your case, when recovery is not possible, your tax liability is consequently increased.
No, it cannot be classified as export of services. According to the place of provision rules under GST, place of provision of intermediary services is location of service provider I.e. India.
Whereas for qualifying as export of services, place of provision of service should be outside India.
Thus, it cannot be classified as export of services.
Yes, you have to pay the GST@18% in addition to 30% income tax.
No,it will not be treated as export of services.
As per my opinion yes this service fall under export of service because receiver of service located outside INDIA
Dear Sir
It is consider as a export of services.
With so many different opinions on the subject from learned CAs,pls advise how can I proceed. If I have to pay 18% GST from my own pocket in addition to 30% income tax,there is virually no incentive for me to remain in this business?
Unfortunately, this is the tax burden for such commission business.
Can you work as a trader trader instead of a commission agent? Though goods may be shipped directly, but the Taiwan company invoices you and you invoice to the north Indian customer.
This would although increase compliances, but decrease taxes. ( Not decrease exactly, but the burden of GST can be shifted on the customers)
I am taking back my earlier opinion because as per recent order under Maharashtra Goods and Services Tax Act, 2017 your case not fall under export of services thus no refund application can made, but GST rate is 18% and IGST is applicable.
for your ready reference summery and details of order as follow :
Summery
Order(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO.GST-ARA-23/2018-19/B-87
Mumbai, dt.10/8/2018
For reasons as discussed in the body of the order, the questions are answered thus –
Question :- (i) Whether the “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad receiving such services and an Indian importer of an Equipment, is an “export of service” falling under section 2(6) & outside the purview of section 13 (8) (b), attracting zero-rated tax under section 16 (1) (a) of the Integrated Goods and Services Tax Act, 2017?
Answer :- Answered in the negative.
Question :- (ii) If the answer to the Q. (i) is in the negative, whether the impugned supply of service forming an integral part of the cross-border sale/purchase of goods, will be treated as an “intra-state supply” under section 8 (1) of the IGST Act read with section 2(65) of the MGST Act attracting CGST/MGST ? And, if so at what Rate?
Answer: The said supply will be treated as Inter-State Supply and not Intra State Supply and IGST will be levied @ 18%.
You will need to pay 18% GST and this transaction will not fall under export of service.
Hi,
- Agents are intermediaries and for intermediaries, there is a specific provision in law in respect to place of supply of services. In your case, place of supply would be the location of the service provider i.e. your location so every time you will pay CGST and SGST.
- You need to charge the GST amount on the invoice as it will be a tax invoice and not an export invoice otherwise you need to do the reverse calculation. Rate would be 18%.
- If you are working as sole proprietor then income tax would be calculated on slab basis and not on flat rate i.e. 30%.
- Basically GST is a collection from customer and not from own pocket.It is upto you how to collect it from customer either by increasing the commission amount or charging GST separately on the current commission.
- Income tax is a tax on the profit earned which is earned by you only.
Thanks
Hi,
Totally agree with your concern.
But you will have to pay 18% GST in addition to 30% tax.
Your services are not considered as export of services.
Thanks & Regards,
Payal Chhajed
Hi Thanks for sharing my concern but dont you think it is an anomaly in GST-I dont think of any other business being subjected to this situation when tax can not be recovered from customer as GST is a consumption based tax but an intermediary is being asked to take the burden. I think it is for the CA community to take up this matter with Govt authorities at various conferences etc that CAs attend.
Noted.
We will definitely discuss the said issues with CA fraternity.
I agree it's a huge tax liability. Nothing has worked out yet for decreasing such hardships.
You may refer to the ruling by AAR In re Mrs. Vishakhar Prashant Bhave - Micro Instruments (GST AAR Maharashtra) where similar issue had been raised up.
Hi Thanks for your concern-I think this tax anomaly needs to be raised by CAs' fraternity at various conferences and Forums with Govt Taxation authorities as GST a consumption based tax is being recovered from an intermediary.
Surely we'll try to put the genuine hardships forward.
Yes Sir,
Sure we will do that.
I guess since you have not charged GST from client and since you need to pya GST you can reverse calculate and pay the gst out of same.
In a way you are correct but you also need to understand that GST you need to charge from customer and income tax you need to pay out of your income. It's your mistake if you didn't charge GST from customer.
Hi,
- Govt. is not asking you to pay from your own pocket. You are supposed to collect it from the service receipent. The above case laws referred were in reference to determine whether it is intra-state or inter-state sale.
- It is totally a wrong perception that you are paying it from your own pocket.
Thanks
Yes your concerns are genuine and we will try to take forward these concerns to see if we can get a solution.
Dear Sir,
Your services are classified under intermediately services which are chargeable to GST@ 18%.
Yes, your concern is right but you have to pay 18% GST in addition to 30% income tax.
As per rules, The place of supply of the intermediately services is the location of the supplier of services.
So, your services can not be classified as export of services.