GST Council Meeting Likely to Provide Relief to Intermediaries
The 55th Goods and Services Tax (GST) Council meeting, scheduled for Saturday, is expected to bring significant relief to intermediaries, including brokers, agents, and online bidding portals that provide services to overseas entities. This potential relief comes in the form of a proposal to classify these intermediaries as exporters, which would render their services zero-rated for GST purposes.
Currently, intermediary services are subject to an 18% tax under the Central GST Act. However, sources indicate that the fitment committee of the GST Council has proposed an amendment to the Integrated GST Act, specifically the deletion of Section 13(8)(b). This modification would alleviate the financial burden imposed by the existing 18% GST on these services, effectively creating a more favorable competitive landscape for Indian intermediaries when compared to foreign counterparts.
This proposal is particularly timely, given the recent issuance of show-cause notices (SCNs) totaling Rs 3,357 crore to these intermediaries, which may be withdrawn if the amendment is enacted. In India, a vast number of individual and corporate brokers operate within the commodities market, especially in sectors such as textiles and leather goods. Granting them the zero-rated benefit would provide substantial financial relief.
Experts have indicated that online bidding platforms, such as Mjunction, ONDC (Open Network for Digital Commerce), and MSTC, would also stand to gain from the proposed amendment. One tax expert remarked, “Ideally, the service of the agent should be categorized as an export of services under Section 2(6) of the IGST Act and should be zero-rated. However, Section 13(8)(b) hinders this by stipulating that the place of supply for these services is considered to be the location of the service provider in India.
The current 18% tax creates an additional burden on intermediaries, especially since the recipients of such services abroad do not receive input tax credit on these claims.
In a related development, the law committee has recommended that the GST Council simplify the process of providing input tax credit via the newly launched Invoice Management System (IMS). This system is designed to assist businesses in tracking their GST liabilities more efficiently.
As it stands, the current framework poses challenges regarding accounting timelines and reconciliation processes, placing financial strain on suppliers who often find themselves accountable for GST liabilities they should not bear.
As the GST Council meets, the proposed changes could herald a new chapter for intermediaries in India, fostering a more equitable business environment while promoting growth in international trade.
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.