Intermediary
Under GST/ Service Tax
Deepak Kumar Jain
B.Com., ACA., ACS., LLB
25-Jul-2020

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Index: Intermediary
• Definition
• Meaning of ‘broker, agent or other person’
• Meaning of ‘arranges or facilitates’
• Select case-laws
• Practical perspective
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Definition
Section 2(13) of IGST Act:
“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;
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Service Tax:
Rule 2(f) of the place of provisions of Services
Rules, 2012, defines “Intermediary” to mean:
• “a broker, an agent or any other person, by
whatever name called, who arranges or
facilitates a provision of a service (hereinafter
called the ‘main’ service) or a supply of goods
between two or more persons but does not
include a person who provides the main service

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Intermediary: functionality test
A broker, agent or other person
• Black’s Law Dictionary:
• Broker: “An agent employed to make bargains and contracts between other persons, in matters of trade,
commerce or navigation, for a compensation commonly called "brokerage.”
• Agent: “One who represents and acts for another under the contract or relation of agency, q. v. Classification.
Agents are either general or special. A general agent is one employed in his capacity as a professional man or
master of an art or trade, or one to whom the principal confides his whole business or all transactions or functions
of a designated class; or he is a person who is authorized by his principal to execute all deeds, sign all contracts, or
purchase all goods, required in a particular trade, business, or employment.”
• To interpret the term ‘or other person’, whether meaning be drawn from:
• Ejusdem Generis: of the same kind or nature
• Functionality: A broker or agent from a functionality perspective (by whatever name called)
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Intermediary: functionality test
• Facilitate: (an action or process) to make easy or easier or possible
• Arrange: (1) Put (things) in a neat, attractive, or required order
(2) Organize or make plans for (a future event)
(3) Adapt (a musical composition) for performance with instruments or voices other
than those originally specified
(4) archaic form: Settle (a dispute or claim)
{Lexico Online Oxford Dictionary}
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Intermediary: conditional test
• Nature and value: An intermediary cannot alter the nature or value of the service
• Separation of value: The value of an intermediary’s service is invariably identifiable from the main supply of
service that he is arranging.
• Identity and title: The service provided by the intermediary is on behalf of the principal and is clearly
identifiable
{Service tax education guide}
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Intermediary: select case-laws
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Particulars Details
Appellant Name M/s GoDaddy India Web Services Pvt. Ltd.
Court AAR (Service Tax)
Ref: AAR/44/ST/14/2014
Facts: Godaddy in India provides Marketing and Promotion Services, Supervision of quality of third party customer care
center services and Payment processing services, among others.
Held Business support services – not intermediary
Reasoning It has been submitted by the applicant that services to be provided by the applicant are not peculiar only in applicant’s
case but are provided by various Indian entities to their overseas customers in India as a single package. Further,
supporting the business of GoDaddy US in India is the main service and processing payments and oversight of services
of third party Call Centers are ancillary and incidental to the provision of main service i.e., business support service.
Further, applicant would provide said services as a package and the payment for the entire package would be a
consolidated lump sum payment. Applicant submits that in view of all these indicators, service provided by them to
GoDaddy US is a bundle of services, which is bundled in normal course of business. This point has not been
controverted by the Revenue. We agree with the submissions of the applicant that proposed services are a bundle of
services, bundled in normal course of business and not intermediary service.

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Intermediary: select case-laws
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Particulars Details
Appellant Name M/s Universal Services India Pvt. Ltd
Court AAR (Service Tax)
Ref: AAR/44/ST/15/2014
Facts: Applicant provides payment processing services to WWD US. WWD US provides services to end customers in India,
being in the nature of providing domain name registration, web hosting, website designing and other services.
Applicant assists in providing solution for payments by their customers for services provided by WWD US.
Held Business support services – not intermediary
Reasoning Applicant is not at all concerned with respect to services provided by WWD US. They neither facilitate or arrange
supply on their behalf. Further, the definition of “intermediary” as envisaged under Rule 2 (f) of POPS does not
include a person who provides the main service on his own account. In the present case, applicant is providing main
service i.e. “business support services” to WWD US and on his own account. Therefore, applicant is not an
“intermediary”.

Accolet supports “Bhiksh Daan Foundation”, a registered charitable trust. Bhiksh Daan, is a means to social cause. We are honored to be part of the noble cause.
© 2020 Accolet Advisors Private Limited | All Rights Reserved
Intermediary: select case-laws
9
Particulars Details
Appellant Name Vservglobal Private Limited
Court AAR (GST)
Ref: GST-ARA-03/2018-19/B-59
Facts: Clients are engaged in Trading of Chemicals and other products in International Trade. Vserv will come into picture
after finalization of Purchase/ Sale order by a Client. Vserv will undertake order processing, accounting, supply chain
management, payroll, etc., for its clients.
Held Intermediary
Reasoning A sum of all activities mentioned above indicate applicant as a person who arranges or facilitate supply of goods or
services or both between the overseas client and customers of the overseas client, and therefore applicant is clearly
covered and falls in the definition of an intermediary as defined under the IGST Act. As the applicant is held as
Intermediary the provisions pertaining to place of supply in case of intermediary services as provided in sub-section 8
of section 13 are relevant.

Accolet supports “Bhiksh Daan Foundation”, a registered charitable trust. Bhiksh Daan, is a means to social cause. We are honored to be part of the noble cause.
© 2020 Accolet Advisors Private Limited | All Rights Reserved
Intermediary: select case-laws
10
Particulars Details
Appellant Name AMD India Private Limited
Court Tribunal (Bangalore)
Ref: Final Order Nos.22825 to 22827/2017, dated 20-Nov-2017
Facts: AMD India undertakes software development and as a part of the developmental activity has an agreement for
marketing support. Under the marketing support agreement, it promotes the brand AMD. AMD India does not
engage with the potential customer or existing customer and does not arrange or facilitate sale of AMD Products in
India
Held Business Support Services – Not Intermediary
Reasoning The MSA does not provide the appellant will facilitate or arrange the purchase and sale on behalf of the Appellant
entities outside India. The service provided do not fall under the definition of intermediary and it satisfies all the
conditions prescribed under Rule 6A of the Service Tax Rules, 1994, as export of service.

Accolet supports “Bhiksh Daan Foundation”, a registered charitable trust. Bhiksh Daan, is a means to social cause. We are honored to be part of the noble cause.
© 2020 Accolet Advisors Private Limited | All Rights Reserved
Intermediary: practical perspective
• A service provider who merely promotes (not interested in facilitating or arranging supply) is
not an intermediary
• There should be active participation by an intermediary to facilitate or arrange a supply
• The extent of participation may vary, which may also result in varied remuneration
• The service provider engaged after winning the contact of supply, ought not to be an
intermediary
• The intermediary should be, between the main supplier and the end-customer and the
person should be known to both
• A service provider functioning behind the supplier is often providing support services
• A subsidiary engaged in passing on leads + engaging or inducing the potential customer +
concluding deal, is an intermediary function (need not be recognized broker or agent)
• The intermediary cannot be the main supplier
• The remuneration may be in any form i.e. commission, cost plus, fixed + variable, etc.
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Accolet supports “Bhiksh Daan Foundation”, a registered charitable trust. Bhiksh Daan, is a means to social cause. We are honored to be part of the noble cause.
© 2020 Accolet Advisors Private Limited | All Rights Reserved
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