GST on Foreign Commission and Service Payments: Advance Ruling 43/ARA/2026
The Tamil Nadu Authority for Advance Ruling clarified when Indian exporters must pay GST on payments made to foreign service providers.
- Ruling
- Advance Ruling No. 43 /ARA/2026, dated 04.05.2026
- Dated
- 04 May 2026
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Commission paid to a foreign director is subject to GST under reverse charge.
- Payments to foreign clearing and forwarding agents attract GST under reverse charge.
- Commission paid to foreign marketing agents is not liable for GST.
In short
The company asked the Authority for Advance Ruling (AAR) whether they must pay Goods and Services Tax (GST) on commissions and fees paid to various foreign service providers. The authority had to decide if these payments qualify as an import of services, which would require the Indian company to pay the tax directly to the government.
What has changed
How it worked before
Businesses were often unsure whether payments to foreign agents for marketing or logistics were taxable as imports of services or exempt as intermediary services.
What has changed
The authority ruled that services from a foreign director and clearing agents are imports of services, making the Indian company liable for GST under reverse charge. However, foreign marketing agents are considered intermediaries, meaning their services are not taxable in India. This distinction means businesses must now carefully categorize the specific nature of each foreign service provider.
Who this affects
Indian exporters who hire foreign directors, marketing agents, or logistics providers.
An example
A garment exporter in Mumbai hires a foreign consultant to manage their overseas warehouse. Based on this ruling, the exporter should treat this as an import of service and pay GST under reverse charge. If they instead hire a foreign agent solely to connect them with buyers, that agent may qualify as an intermediary, potentially exempting the commission from GST.
What you should do
Review your contracts with foreign service providers to determine if they act as intermediaries or provide direct services. Remember that this ruling only applies to the company that asked; your local tax officer may have a different view on your specific agreements.
If you do nothing
If you incorrectly assume your foreign payments are exempt, you may face a demand for unpaid GST plus interest and penalties. A tax officer can challenge your classification during an audit, and relying on a ruling that does not apply to your specific facts will not protect you from these costs.
The terms explained
- Reverse charge
- A system where the person receiving the service, rather than the person providing it, is responsible for paying the GST to the government.
- Import of services
- When a business in India receives services from a supplier located outside India, which may trigger a tax liability for the Indian recipient.
- Intermediary
- A person or business that arranges or facilitates the supply of goods or services between two other parties, acting as a broker or agent.
The ruling in detail
Authority for Advance Ruling
M/s. Sampurnam Hosieries Impex Private Limited
Advance Ruling No. 43 /ARA/2026, dated 04.05.2026 · Tamil Nadu
Questions before the authority
- The export order is sourced by a Director of the company who is a foreign national - is the payment of commission liable to pay GST?
- Is payment to marketing agents who are foreigners liable to pay GST?
- Is Clearing and Forwarding in Foreign land liable to pay GST?
Facts
The applicant is an exporter of garments that utilizes services from a foreign director for marketing, foreign marketing agents, and foreign clearing and forwarding (C&F) agents. The director, who owns 99% of the company, receives a 15% commission on FOB value for sourcing orders. Other foreign marketing agents receive a 20% commission, and foreign C&F agents are utilized for shipments.
Ruling
| Question | What the authority ruled |
|---|---|
| Commission to foreign director | Liable to GST under reverse charge Falls under the ambit of Import of Services |
| Commission to foreign marketing agents | Not liable to GST Qualifies as intermediary services with place of supply outside India |
| Charges to foreign C&F agents | Liable to GST under reverse charge Falls under the ambit of Import of Services |
The authority ruled that GST is payable under reverse charge on the commission paid to the foreign director and on charges paid to foreign C&F agents. However, it held that GST is not payable on the commission paid to foreign marketing agents as they qualify as intermediaries whose place of supply is outside India.
Reasoning
The authority determined that the services provided by the director and C&F agents constitute an **import of services** under Section 2(11) of the IGST Act, 2017, as the supplier is located outside India and the recipient is in India. Consequently, the applicant is liable to pay tax under **reverse charge** per Notification No. 10/2017-Integrated Tax (Rate). Conversely, the marketing agents were classified as intermediaries under Section 2(13) of the IGST Act, 2017, meaning the place of supply is the location of the supplier (outside India) per Section 13(8), thus falling outside the scope of import of services.
Provisions relied on
- Section 2(11) of the IGST Act, 2017
- Section 2(13) of the IGST Act, 2017
- Section 7(4) of the IGST Act, 2017
- Section 13(2) of the IGST Act, 2017
- Section 13(8) of the IGST Act, 2017
- Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017
For the practitioner
This ruling clarifies the taxability of various foreign service providers for an Indian exporter. It highlights the critical distinction between general services, which may attract **reverse charge** as an import of service, and **intermediary services**, which may not be taxable if the place of supply is outside India. Practitioners should carefully evaluate whether a foreign agent acts as an intermediary or provides a direct service to the Indian entity.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/1-sampurnam_hosieries_aar_order-1.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
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