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Intermediary services in GST hitting export

Intermediary services in GST :

The concept of intermediary services in GST is borrowed from service tax. In case of an intermediary service the place of supply will be the location of supplier. It will impact the nature of services when recipient is outside India.In this article we will discuss on all the following topics.

  1. Conditions for export of services in GST
  2. Provisions related to place of supply for international transactions in GST
  3. Meaning of Intermediary Services in GST
  4. Impact of Intermediary Services
  5. Checklist to verify your export of service is not falling in Intermediary Services
  6. Practical case studies related to intermediary services:

    Conditions for export of services in GST

Section 2(6) of IGST Act defined the export f services. The section is reproduced here:

“export of services” means the supply of any service when,––

– the supplier of service is located in India;

– the recipient of service is located outside India;

– the place of supply of service is outside India;

– the payment for such service has been received by the supplier of service in convertible foreign exchange; and

– the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;


Provisions related to place of supply for international transactions in GST


  1. The provisions of place of supply are covered in section 10,11,12 & 13 of IGST Act. Section 13 covers the provisions related to place of supply of services in case any of supplier or recipient is located outside India. In case of export of services transactions section 13 of IGST Act will be relevant.

Sl. No.

Nature of services

Place of supply


General cases (Not falling in any of exception)

Location of recipient


Specific cases

Location provided in that specific entry


Out of these specific provisions section 13(8) covers the cases where the location of supplier will be the place of supply.


Section 13(8) of IGST Act :


The place of supply of the following services shall be the location of the supplier of services, namely:–(a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) intermediary services;

(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.

Meaning of Intermediary Services in GST:

The term intermediary services are defined in the IGST Act itself. It means e.g. where the consideration for a particular service is dependent on a third supply. It will fall under the definition of intermediary services.

Section 2(13) of IGST Act:

“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.

Here the term arranges or facilitates is very important. It indicates that if your contract is to arrange for a third supply. Your services will fall in the precincts of intermediary service.

Impact of Intermediary Services:

The impact of falling in intermediary service will be that the place of supply will fall in India. It will change its nature from an export to a domestic supply.The tax charged on this supply will not be eligible for section 16 refund.

Checklist to verify your export of service is not falling in Intermediary Services

– Your supply is an independent supply.

– Your consideration is not dependent on volume or existence of any other supply.

– Your contract is clear that you will get your remuneration even if there is no third supply.

Practical case studies related to intermediary services in GST:


Case Study I:


Whether pure and mere promotion and marketing services will be “intermediary services” for the purposes of section 12 of the Integrated Goods and Services Tax Act, 2017 for determining the place of supply of such services?


Applicant: M/s Toshniwal Brothers (SR) Private Limited, Advance Ruling No. KAR ADRG 23 / 2018, Dated 19th September 2018.

Ruling:  Yes


It was held that it will be an intermediary supply because of two major facts:

  • The agreement copy provided by the applicant shows clearly that the price is negotiated by the applicant for the machinery or equipments and intimated to the overseas supplier. It is also seen that the Principal who is the overseas supplier reserves the right to conclude or reject or change the contract, but he shall inform the decisive reasons to the applicant.
  • The commission payable to the applicant is tied to the amount of sales that the applicant solicits and is typically an agency transaction.

Case Study II:


Whether the following will be an intermediary service?

  1. Conducting Promotional and marketing activities for promotion of the courses taught by various foreign universities.
  2. Making the prospective students aware about the course fee and other associated costs, market intelligence about the latest educational trend in the territory and ensuring payment of the requisite fees to the Universities if the prospective students decide upon pursuing any course promoted by the Applicant.


Applicant: Global Reach Education Services Pvt Ltd

Ruling : Yes

It was held that Promotional service is incidental and ancillary to the above principal supply and the Applicant is paid consideration in the form of Commission, based on performance in recruiting students, as a percentage of the tuition fee collected from the students enrolled through the Applicant. The Applicant, therefore, represents the University in the territory of India and acts as its recruitment agent. In fact, Clause 2.1 of the Background forming part of the Agreement clearly says, “The University engages the Education Agent to be its representative to perform the Services from the commencement date in the Territory and on the terms set out in this Agreement until the Expiry date.” It is, therefore, clear that whatever services the applicant provisions are provided only as a representative of the University and not as an independent service provider.

We can see that the basic factor to decide an intermediary service is:

  1. Whether an another independent supply is taking place because of that services?
  2. Whether the consideration is dependent on conversion?
  3. Whether the relationship of service provider and receiver is of Principal agent?
  4. What is the primary nature of service?

It will be dependent on case-to-case basis. But we need to see the basic feature of intermediation.An independent scrutiny of these cases is required. May be you are considering your supply as an export but it is a domestic supply. Consequences will be high in future.

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New Delhi, India

CA Shaifaly Girdharwal is a GST consultant, Author, Trainer and a famous You tuber. She has taken many seminars on various topics of GST. She is Partner at Ashu Dalmia & Associates and heading the Indirect Tax department. She has authored a book on GST published by Taxmann.

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