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Article Dated 20th September, 2023

GST On Intermediary Services


The Goods and Services Tax (GST) regime in India has brought about a significant transformation in the taxation landscape. One of the critical aspects under the GST Law is the taxation of intermediary services. In this article, we will delve into the intricacies of intermediary services, providing a comprehensive overview of their definition, examples, Place of supply provisions, and the possibility of exporting these services, along with their tax implications.

Definition of Intermediary Services under GST

Intermediary services play a pivotal role in facilitating various transactions and ensuring the smooth functioning of businesses. "Intermediary" is defined under Section 2(13) of the IGST Act, 2017 which is also reproduced as under –

"(13) "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;"

In simpler terms, an intermediary is an entity that acts as a middleman or facilitator in connecting two parties for the exchange of goods or services, without actually delivering the goods or providing the services.

Examples of Intermediary Services

To better understand intermediary services, let`s explore some common examples:

a. Real Estate Agents: Real estate agents connect buyers and sellers, facilitating property transactions. They earn commissions for their services but don`t transfer the property themselves.

b. Travel Agents: Travel agents arrange travel services like flights, accommodations, and tours for their clients. They receive commissions from airlines, hotels, and Tour operators.

c. Stockbrokers: Stockbrokers facilitate the buying and selling of securities on behalf of investors. They earn brokerage fees for their services.

d. Online Marketplaces: E-commerce platforms act as intermediaries between buyers and sellers, providing a platform for transactions. They charge fees for using their marketplace but don`t own the products sold.

Place of Supply Provisions for Intermediary Services

The determination of the Place of supply is crucial for GST compliance. Determining the Place of supply under GST is crucial for several reasons. It determines the tax jurisdiction, applicable tax rates, eligibility for Input tax credit, compliance and reporting accuracy, and distinguishes between domestic and international transactions. Accurate determination ensures businesses operate efficiently within the GST framework while minimizing compliance risks and financial burdens.

The GST Act outlines Place of supply provisions for intermediary services under Section 13(8). According to this section:

"The Place of supply of intermediary services shall be the location of the supplier of services, i.e., the intermediary."

Complete provisions of section is reproduced as under for ready reference-

"(8) 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.

Explanation . - For the purposes of this sub-section, the expression,-

(a) "account" means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account;

(b) "banking company" shall have the same meaning as assigned to it under clause (a) of section 45A of the Reserve Bank of India Act, 1934;

(c) "financial institution" shall have the same meaning as assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934;

(d) "non-banking financial company" means, -

(i) a financial institution which is a company;

(ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or

(iii) such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify."

For the sake of current discussion only clause of Sub-Section 8 to Section 13 of the IGST Act, 2017 is relevant.

Intermediary Services Provided to Persons Outside India as Exports

Under GST, services provided to a person located outside India are considered exports. This is in line with Section 2(6) of the Integrated Goods and Services Tax (IGST) Act, 2017, which defines "Export of services" as:

"(6) "Export of services" means the supply of any service when,-

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the Place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and

(v) 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;"

Intermediary services are not eligible for export benefits under GST. This is because the Place of supply of intermediary services is the location of the service provider, even if the recipient of the service is located outside India. This is in accordance with Section 13(8)(b) of the IGST Act, which states that the Place of supply of intermediary services is the location of the supplier of services, irrespective of the Location of the recipient of services.

As a result, even if an intermediary service provider supplies services to a foreign recipient, the services will be considered as taxable in India and will be liable to GST. This is because for a service to be considered as export of service the Place of supply of service should be outside in India. In case of intermediary services since the Place of supply falls within India i.e., the location of supplier therefore the same cannot be treated as export of service.

The non-eligibility of intermediary services for export benefits under GST has been a matter of concern for many businesses. This is because it can make it more expensive to export goods and services, as businesses will have to pay GST on the intermediary services that they use.

Multiple AARs have also ruled in similar fashion. For example, in case of Five Star Shipping it was held that:

"The place of supply of intermediary services is the Location of the supplier of services, irrespective of the Location of the recipient of services. In the present case, the intermediary services are provided by the applicant, which is located in India. Therefore, the Place of supply of the intermediary services is India and the services are liable to GST."

CA Pranay Jain is a young and aspiring Chartered accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.

He is also socially active on LinkedIn at

CA Pranay Jain
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