GST Update: Andhra Pradesh AAR | Marketing consultancy service to foreign enterprise is intermediary services | nasscom | The Official Community of Indian IT Industry

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GST Update: Andhra Pradesh AAR | Marketing consultancy service to foreign enterprise is intermediary services

Tejasvi

@tejasvi

August 24, 2021

Public Policy

The Andhra Pradesh Advance Ruling Authority (AAR), in the case of M/S DKV Enterprises Private Limited (Applicant) recently held that marketing consultancy service provided to a foreign entity shall be considered as intermediary services and accordingly liable to GST.

Background

M/s. DKV Enterprises Private Limited is an authorised non-exclusive consultant for Grace Products (Singapore) Private Limited for sale of fluid cracking catalyst and additives. In this regard, the Applicant provides marketing consultancy service in India on behalf of foreign company and bills directly to the foreign company in foreign currency. It was iterated that the Applicant is not providing any services to Indian client and does not have any agreements or payment arrangement with the Indian entities.

The Applicant had earlier sought an Advance Ruling if the said provision of marketing and consultancy services will be considered as export of services. The AAR had ruled that the such services were in fact in the nature of intermediary services and attracts GST.

Aggrieved by the said order, the Applicant opted for an application before the Appellate Authority for Advance Ruling. The matter was remanded back to the original Authority to examine afresh and dispose accordingly.

Observations and Ruling

The AAR observed that the services provided by the Applicant fit into the definition of “intermediary” as defined under the Section 2(13) of the IGST Act. The said supply shall not be classified as an export of service. Further, the place of supply in case of intermediary services shall be as provided in sub-section 8 of section 13 of the IGST Act i.e inside India.

It was held that the CESTAT judgement in the case of IBM India Pvt Ltd. versus Commissioner of Central Excise and Service Tax relied upon by the Applicant was in relation to pre-GST period and shall not be applicable to the intermediary service under the IGST Act.

Accordingly, the consideration received in foreign currency shall be subject to GST at the rate of 18%. Interstate provisions as contained under Section 7(5)(c) shall be applicable and hence IGST is payable under such transaction.

We hope you will find the update useful. Copy of the ruling is attached for your reference.

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Tejasvi