No GST on Payment to Overseas Commission Agent under RCM: AAR [Read Order]

The Authority for Advance Rulings (AAR), Uttarakhand has held that GST cannot be levied on the payments to overseas commission agent under reverse charge mechanism.

The applicant is a manufacturer and carries on the business of supplying seasonings, spices, premixes and similar food products to its customers located within and outside India. The applicant approached the foreign customers in order to supply (export) its goods to customers located outside India. The third party intermediaries assist the applicant in exporting the goods manufactured by them to the prospective buyers who are located outside India.

A bench of Mr. Anurag Mishra (Member) and Mr. Rameshvar Meena (Member) observed that section 5 of the IGST Act, 2017 deals with levy and collection of tax i.e. IGST and section 5(3) of the IGST Act, 2017 provides that the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

“Thus on perusal of legal provisions, we find that 'import of services' shall be treated as interstate supply of services and the same is chargeable to IGST under reverse charge i.e. service recipient located within Indian territory has to pay the tax. Since the transaction is related to an intermediary service which is out of the ambit of 'import of services' as discussed in foregoing paras, accordingly we observe that GST under reverse charge is not payable on the same,” the bench said.

In concluding the order, the bench held that “Overseas Commission Agent is covered within the definition of the term 'intermediary* as provided under section 2(13) of the IGST Act 2017. Services received by applicant from the Overseas Commission Agent do not fall within the meaning of the term 'import of services* as provided under section 2(11) of the IGST Act, 2017. The applicant is not required to pay GST on RCM basis under section 5(3) of the IGST Act, 2017 on commission paid to the Overseas Commission Agent.”

To Read the full text of the Order CLICK HERE

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