XYZ (India) is giving a back-office support to its Associate Company viz. PQR, Singapore (A separate legal entity) and as mentioned in the agreement, the scope of services is all back-office services including administration, finance & accounting, logistics management, supply chain management, marketing management, product development and regulatory, bio-studies, and such other services as mutually agreed. For this purpose, XYZ is raising Debit Note on them towards ‘Service charges’ in foreign currency. Is XYZ required to pay GST on it?
The issue is very tricky as tax treatment hinges upon whether XYZ(India) is regarded as intermediary or not. In this regard two Advance Ruling are relevant namely Vservglobal Pvt. Ltd. (GST AAAR Maharastra) and Godaddy India Web Service Private Ltd., reported as 2016 (46) S.T.R. 806 (A.A.R.).
In case services are supplied on own account and arranging / facilitating of supply amongst two or more persons is not involved, such supply will not be regarded as intermediary services and in such cases the POS as per Sec 13 of the IGST Act will be the location of the recipient i.e. outside India.
As amount is also being recd in foreign currency in this case it should be regarded as export of services as per Sec 2(6) of the IGST Act and consequently a zero rated supply.As PQR, Singapore is a separate legal entity it would not be regarded as establishment of XYZ and thus the condition laid in clause (v) of Sec 2(6) should be met.
Team Clearmytax.in