GST Applicable on Imported Marketing and Clearing & Forwarding Services from Foreign Entities: AAR

The present Authority for Advance Ruling (AAR) Tamil Nadu has been sought by M/s Sampurnam Hosieries Impex Private Limited (applicant) by filing an application in Form GST ARA-01, to clarify certain questions concerning the activities it is engaged in.

The applicant is an exporter of garments and falls under the administrative control of the Central Tax Authority. Its principal place of business is located at 4/57, M.G.Pudur Post, Coimbatore – 641406. The applicant utilises the services of export marketing agents and foreign clearing and forwarding agents.

Questions Raised by Applicant:

The applicant has asked the following questions, seeking the Authority for Advance Ruling (AAR) Tamil Nadu:

“Question 1. One of the directors of the company is a foreign national. He is planning to make the marketing and sourcing of orders. His commission will be at 15% of the invoice value. What will be the tax liability in this case?

Question 2. Marketing agents are foreigners and they will be paid 20% of the invoice value for marketing. What will be the tax liability in this case?.

Question 3. Clearing and forwarding will be done in a foreign country by a foreign company/individual. What will be the tax liability in this case?”

Ruling Given by AAR Tamil Nadu:

The Authority for Advance Ruling (AAR) Tamil Nadu has given the following ruling in answer to the questions asked by the applicant:

Answer 1: The commission paid to the director, who is a foreign national, for the purpose of marketing and sourcing of orders is liable for GST as it falls under the scope of “Import of Services” under Section 2(11) of the IGST Act, 2017 and is also liable for tax under reverse charge as laid down through notification No. 10/2017 Integrated Tax (Rate) dated June 28, 2017.

Answer 2: There will be no tax liability in case marketing agents are foreigners and they are paid 20% of the invoice value for marketing, as GST is not payable on commissions paid to marketing agents located in foreign countries because it falls under the category of intermediary services as per Section 2(13) of the IGST Act, 2017 and consequently, do not fall under the scope of “Import of services” as prescribed under Section 2(11) of the IGST Act, 2017.

Answer 3: Yes, there will be certain tax liability in case of clearing and forwarding done in a foreign country by a foreign company or individual, as GST is payable on charges paid to C&F agents and it falls under the scope of “Import of Services” in terms of Section 2(11) of the IGST Act, 2017, and tax is also liable to be paid here under reverse charge as laid down in notification No. 10/2017 Integrated Tax (Rate) dated June 28, 2017.

Refer to the official advance ruling for complete information.