The newly released GST Circular 159 offers clarification on doubts related to the Scope of “Intermediary”. The circular resolves the issue pertaining to the confusion regarding definitions of an intermediary. As per the circular, let us understand – “who is an intermediary.”
Definition of intermediary: “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.”
To elaborate and simplify the definition, the concept of intermediary has been borrowed from the erstwhile Service Tax Regime and thus is defined under section 2(13) of the IGST Act to mean a broker or agent or any other person who arranges or facilitates the supply of goods or services or both or securities between two or more persons.
Primary requirements for intermediate service –
- Minimum three parties
- Two distinct supplies: There should be two distinct supplies in case of provision of intermediary services;
- The main supply between the two principals can be a supply of goods or services or securities.
- An ancillary supply is a service of facilitating or arranging the main supply between the two principals. This ancillary supply is the supply of intermediary service, and is clearly identifiable, and distinguished from the main supply. A person involved in the supply of main supply on a principal to principal basis to another person cannot be considered as a supplier of intermediary service.
- An intermediary service provider needs to have the character of an agent, broker or any other similar person.
- It does not include a person who supplies such goods or services or both or securities on his own account.
- Sub-contracting for a service is not an intermediary service.
- The specific provision of a place of supply of ‘intermediary services’ under section 13 of the IGST Act shall be invoked only when either the location of supplier of intermediary services or location of the recipient of intermediary services is outside India.
Circular 159 surely provides information on the basic characteristics of intermediaries under the GST Regime to clear the air around the subject. The above information will help to identify an intermediary personal however, no particular class of services have been notified that will qualify as intermediary services within section 2(13) of the IGST Act. Thus, it is advisable that the recognition of intermediary must be construed based on the terms of the contract and the facts of all individual cases.
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