pri GST: Back Office Support Services are Taxable and not Exports Back Office Support Services are Taxable and not Exports- Maharashtra AAR


Vservglobal Private Limited (hereinafter ‘Applicant’) is engaged in providing back office support services to overseas companies (hereinafter ‘Client’) engaged in trading of chemicals and other products in International Trade. Applicant will come into picture after finalization of Purchase/Sale order by the client to undertake following activities:

a. Get SDF (Sale Detail Form) and PDF (Purchase Detail Form) from concerned party;

b. Generate order no. in VOSS;

c. Create PO (Purchase Order) and SC (Sales Contract) in VOSS;

d. Send SC (Sales Contract) & PI (Performa invoice) to customer & get SI (Shipping Instructions) as well;

e. Send PO (Purchase Order) to supplier & Seek PI (Performa Invoice) & Share SI (Shipping Instructions);

f. Liaise with supplier for Cargo Readiness;

g. Liaise with inspection authorities if pre-shipment inspection is needed;

h. Inform customer on tentative schedule;

i. Process payment request in VOSS;

j. Send payment request to client;

k. Provide forwarder/carrier nomination to supplier if FOB (Free on Board);

l. Seek carrier booking details and share with supplier & customer;

m. Follow up for smooth SOB (Shipping on Board) with supplier and forwarder;

n. Log it in Excel Order Sheet – ETD -ETA (Estimated Date of Arrival- Estimated Date of Departure);

o. Get draft BL (Bill of Lading) prior to sailing;

p. Follow up for full shipping documents with supplier;

q. Raise payment request in VOSS for supplier for balance or final payment;

r. Send payment request to Group Company for supplier for balance or final payment;

s. Arrange inspection certificates if applicable;

t. Raise payment request for freight and inspection charges as applicable;

u. Arrange to send originals to Hong Kong;

v. Follow up for Originals sent to Customer from Group company;

w. Notify ETA- reminder to Customer (ETA- Estimated time of arrival);

x. Troubleshooting.

Apart from above applicant would also maintain records of employees of Clients, their payroll, processing, etc. All the payments will be done directly by Clients and applicant will maintain accounting of the same. Applicant will be compensated basis per purchase/sale transaction handled, subject to minimum amount, on monthly basis in convertible foreign exchange.

Question on which ruling was required from Authority for Advance Ruling (hereinafter ‘AAR’):

Whether the aforesaid services proposed to be rendered qualify as ‘Export of Services/Zero Rated Supply’ in terms of Section 16 of IGST Act?

Bare relevant provisions:

1. In order to qualify as Export of Services, five conditions as per Section 2(6) of IGST Act are cumulatively required to be satisfied as follows:

a. The supplier of service is located in India;

b. The recipient of service is located outside India;

c. The place of supply of service is outside India;

d. The payment for such service has been received by the supplier of service in convertible forex or INR wherever permitted by RBI; and

e. The supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8.

2. Section 2(13) of IGST Act defines ‘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”.

3. As per Section 13(8)(b) of IGST Act, Place of Supply of Intermediary services is location of supplier of the services i.e. location of Intermediary.

Contentions of the Applicant:

1. Applicant only proposes to supply “Business Support Services” comprising of ‘Back Office Support’ and ‘Accounting’ which is its principle supply. If these services also facilitate supply of goods, then it is only an incidental supply to the principle supply.

2. Services provided would be on principle to principle basis.

3. Further applicant referred to para 5.9.6 of CBEC education guide which read as “Similarly, persons such as call centres, who provide services to their clients by dealing with the customers of the client on the client’s behalf, but actually provided these services on their own account, will not be categorized as Intermediaries”.

4. Applicant also referred to ruling of AAR in the erstwhile Service Tax regime in the case of Re: GoDaddy India Web Service Private Ltd., reported as 2016 (46) S.T.R. 806 (A.A.R.) in which GoDaddy India proposed to provide support services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care Centre and payment processing, on principle to principle basis to GoDaddy US. Services were provided with the sole intention of promoting the brand GoDaddy US in India and augmenting its business in India. Further, supporting the business (i.e. business support services) of GoDaddy US in India is the main service and processing payments and oversight (i.e. facilitation) of third party call centres are ancillary and incidental. Hon’ble Authority accepted that the services are bundled in the natural course of business and provided as a package. Proposed service to be provided by the GoDaddy India to GoDaddy US is business support service and not Intermediary service.

It was further observed that GoDaddy India is not concerned in respect of services provided by GoDaddy US to Indian Customers, which relates to domain name registration, transfer services, web hosting services, designing services etc. In case, GoDaddy India was providing service to Indian Customers, he would have received ‘consideration’ from Indian Customers. GoDaddy India is to only receive from GoDaddy US, a fee equal to the operating cost incurred by the GoDaddy India plus mark up of 13% on such costs. It is further noticed that GoDaddy India is to receive said fees from GoDaddy US, even in respect of Indian Customers, who directly remit service charges to GoDaddy US through International Credit Card, wherein GoDaddy India is not in the picture.


  1. The facts of GoDaddy India Web Service Private Ltd., reported as 2016 (46) S.T.R. 806 (A.A.R.) are different and not similar to the present case.
  2. The sum of all activities mentioned above indicate that the applicant is clearly covered within the definition of Intermediary.
  3. Since the Place of Supply of Intermediary services is determined to location of supplier, which in the present case is determined to be location of applicant and thus not outside India. Therefore, it can’t qualify as Export of Services/Zero rated supply.

Author’s Analysis and Comments:

a. Background of AAR:

i. Rulings of AAR is not binding on other taxable persons.

ii. Though Section 105 of CGST Act states that every proceeding before AAR shall be judicial proceedings, however, Rule 103 of CGST rules states that both the member judges of this authority shall be officers not below the rank of joint commissioners. Thus, departmental officers are members of this so-called ‘judicial proceedings’ in AAR.

b. Comment on Ruling: Though in essence, it seems that the facts falls out within the Intermediary services, however, it can certainly be argued that loop holes in agreement are being exploited by AAR to its core. If agreement would have been drafted legitimately, then a ruling favourable to applicant could have been made possible.

c. Analysis of Intermediary Services:

i. The definition of Intermediary is kept same as existed during Service Tax era w.e.f. 1st October, 2014.

ii. Intermediary services essentially require the presence of the following:

a. Involvement of 3 parties;

b. The words ‘arrange’ or ‘facilitates’ are understood to mean in ‘direct’ sense;

c. Arrangement or facilitation for ‘Supply’ of ‘Goods’ or ‘Services’.

d. Illustration: A BPO established in India working as a call centre for providing after sale support to overseas customers of a foreign entity would certainly not fall within the purview of Intermediary as there is no direct facilitation for ‘Supply’ of goods or services in India.

iii. It is very essential that all the agreements with foreign entities are reviewed so that Indian entity doesn’t fall within the meaning of Intermediary. Illustration: An accounting firm established in India is providing accounting services to foreign entity for its sales in India. Agreement provides that consideration for the same shall be charged basis per sale or purchase transaction recorded. This clause can certainly open doors to tax authorities for unnecessary exploitation.

iv. In this ruling, some other contentions (which we do not wish to go into detail) raised by the revenue were that the ‘Recipient is located in India’, ‘the Supplier and Recipient are merely establishment of distinct persons’.

For further consultation, you can please contact the undersigned.

Source- In re Vservglobal Private Limited (AAR Maharastra), Appeal No. 03, Date of Order : 09/04/2018

(Author can be reached at +91-9818472772 /

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July 2021