GST Council may provide exporter status to intermediaries for tax relief

The 55th Goods and Services Tax (GST) Council meeting on Saturday may provide relief to intermediaries such as brokers, agents, and online bidding portals that offer their services to entities abroad.

 

This will be done by classifying them as exporters, making them zero-rated.

 

At present intermediary services are charged at 18 per cent under the Central GST Act. According to sources, the fitment committee of the GST Council has proposed an amendment to the Integrated GST Act by deleting Section 13(8)(b).

 

“This amendment would alleviate the financial burden of the 18 per cent GST currently imposed on these services, thereby creating a more level playing field for Indian intermediaries in comparison to their foreign counterparts,” a source said. 

 

This proposal comes in the light of show-cause notices (SCNs) of Rs 3,357 crore issued to these intermediaries. This may be dropped if the amendment takes effect.

 

In India, many individual and corporate brokers work as brokers or agents in the commodities market, especially related to textiles and leather goods. So providing the zero-rated benefit will give big relief to them.

 

Experts said online bidding portals like Mjunction, ONDC (Open Network for Digital Commerce) and MSTC would also benefit from the proposed amendment.

 

Vivek Jalan, partner with Tax Connect Advisory Services, said: “Ideally the service of the agent should be treated as export of services under Section 2(6) of the IGST Act and should be zero-rated. However, Section 13(8)(b) of the same Act comes in the way and provides that the place of supply of services of such intermediaries should be the place of the service provider, in India.”

 

He added the 18 per cent was an additional burden on these intermediaries because the recipients of such services abroad would not even get input tax credit on such claims. 

 

Separately, the law committee has recommended the GST Council simplify providing input tax credit through the recently launched Invoice Management System (IMS), which helps businesses to track GST liabilities.

 

“The current system disregards the challenges of accounting timelines and reconciliation processes. This has led to financial burdens on suppliers who are often compelled to pay GST liabilities for which they are not liable,” said Rajat Mohan, senior partner, AMRG & Associates.