We have already discussed the concept of place of supply and its importance in GST, as it determines what type of tax you pay. Naturally, exports outside of India, including the export of services, have also fallen under the regulations of GST. The good news is, exports of services are taxed at zero rate.
GST on export of services
In order to ensure that proper regulations are in place, the Advance ruling Authority of West Bengal has given a recent decision regarding which services provided outside of India are exports and which are not.
Specifically, an export of service means supply of services when:
The supplier of said services is located in India;
The recipient of said services is located outside of India;
The place of supply of service is outside of India;
The payment is received by the supplier of said services in convertible foreign currency (other than INR);
The recipient of said services is not a branch office or an agency, or a representational office of the supplier of said services.
In simpler words, the place of supply of the exported services means the location of the receiver of said services. However, with the new decision from the AAR, for a service to be considered an export, the above points need to be met.
In short, if the service is supplied as an intermediary service, the place of supply is the place of the intermediary, which is in India.
An intermediary can be a broker, an agent or any person that arranges the supply of services between two or more people. The activity of such an intermediary is not done for their own person / company but for another person.
If it is determined that the services are provided by the intermediary, then the place of supply will be that of the intermediary. As such, if a person / business provides services to recipients outside of India and acts as an intermediary (a middleman), this service does not qualify as an export and will attract GST.
To ensure you are respecting the GST laws and avoiding unnecessary headaches, the initial arrangement made between two parties should be reviewed to be clear if GST should be charged or not.