Significant Clarifications issued by Government on Applicability of GST on Supply of ‘Intermediary’ Services

By September 21, 2021 December 22nd, 2021 No Comments

The Central Board of Indirect Taxes and Customs had issued Circular No. 159/15/2021- GST dated September 20, 2021, incorporating significant clarifications relating to scope of “Intermediary” and its applicability on back-office services supplies.

The Circular has clarified that there is broadly no change in the scope of ‘intermediary services’ in the GST regime vis-à-vis the erstwhile Service Tax regime. 

It has been clarified that presence of minimum of three (3) parties is essential for a transaction/supply to be considered to be falling within the scope of supply by an ‘intermediary‘. An activity between only two parties on a principal-to-principal basis can therefore NOT be considered as an intermediary service. Further, an intermediary service provider must have a character of an agent, broker, or any other similar person. For the same reasons, sub-contracting for a service is also not an intermediary service.

As a corollary, the specific provision of ‘place of supply’ of ‘intermediary services’ under section 13 of the IGST Act shall be applicable only when the supplier of intermediary services or the recipient of intermediary services is outside India.

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