Back-Office Support for Foreign Clients Attracts GST as Intermediary Service
The Maharashtra AAR ruled that back-office support for foreign clients is an intermediary service and subject to GST rather than zero-rated export.
- Ruling
- NO.GST-ARA- 03/2018-19/B- 59, Mumbai, dt. 07.07.2018
- Dated
- 07 Jul 2018
- 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
- Vservglobal asked if back-office support to foreign clients qualifies as tax-free export.
- The authority ruled that back-office liaising makes the company an intermediary under GST.
- Services provided as an intermediary do not count as an export of services.
- The location of the service provider in India determines the place of supply.
In short
Vservglobal Private Limited provided back-office support, accounting, and administrative liaison services to foreign companies involved in international trade. The company asked the Maharashtra Authority for Advance Ruling (AAR) in order NO.GST-ARA- 03/2018-19/B- 59 Mumbai dated 07.07.2018 whether these services could be treated as zero rated supply export of services under Goods and Services Tax (GST). The company argued that it was supplying services directly to foreign clients, while tax authorities investigated whether it was merely arranging transactions between those clients and third parties.
What has changed
How it worked before
Many Indian back-office support firms assumed that receiving foreign currency from an overseas client automatically qualified their work as a tax-free export of services under GST.
What has changed
The authority decided that providing liaison work, purchase order management, and coordination with suppliers makes a business an intermediary rather than an independent service exporter. Because intermediary services are legally treated as supplied within India, they fail the requirements for export of services under Section 2(6) and cannot be a zero rated supply under Section 16 of the IGST Act. As a result, such support services attract standard GST rates instead of being tax-exempt exports.
Who this affects
Indian back-office service providers, BPOs, and support firms that liaise with third-party vendors or buyers on behalf of overseas clients.
An example
Apex Logistics Support Pvt Ltd in Pune manages inventory updates, creates purchase orders, and coordinates with local suppliers for a trading firm in Dubai. Apex receives a fixed monthly management fee from the Dubai firm in foreign currency and treats its service as a zero-rated export under GST. Under the principle set by this ruling, a tax officer could classify Apex as an intermediary facilitating third-party transactions. This classification would make Apex liable to pay regular GST on its fees because the legal place of supply remains in Maharashtra.
What you should do
Businesses offering similar administrative support should review their service contracts to clarify whether they act as independent principals or as facilitators between parties. Note that an advance ruling binds only the company that applied for it and its specific tax authority, so this decision does not automatically change the law for everyone. You should evaluate your operational agreements with a tax professional to understand your risk under GST.
If you do nothing
If you assume your back-office work is a tax-free export without verifying your contract terms, tax authorities may reclassify your services as intermediary supplies during an audit. You could be forced to pay back-dated GST along with heavy interest and late penalties. Any input tax credit or tax refunds claimed on export assumptions could also be cancelled and recovered by the department.
The terms explained
- Intermediary
- A broker, agent, or facilitator who arranges or coordinates the supply of goods or services between two or more independent parties.
- Zero Rated Supply
- A supply of goods or services, such as exports, where no GST is charged and the seller can claim a refund on taxes paid for business inputs.
- Place of Supply
- The official location defined by GST rules to decide whether a transaction is local, inter-state, or an export.
- Input Tax Credit
- The tax a business pays on its purchases, which it can use to reduce the GST it owes on its sales.
The ruling in detail
Authority for Advance Ruling
VSERVGLOBAL PRIVATE LIMITED
NO.GST-ARA- 03/2018-19/B- 59, Mumbai, dt. 07.07.2018 · Maharashtra
Questions before the authority
- The Applicant Vserv request this Hon'ble Authority to decide as to whether the aforesaid services proposed to be rendered qualify as 'Zero Rated Supply' in terms of Section 16 of the Integrated Goods & Service Tax Act, 2017 or not.
Facts
The applicant, an Indian company, proposed to provide back-office support, accounting, administrative, and liaison services to overseas clients engaged in international trading. These services included creating purchase orders, tracking shipping documents, liaising with suppliers and inspection authorities, and processing payment requests. The applicant was compensated on a cost-plus basis or fixed monthly amount for facilitating these operational activities for its clients.
Ruling
| Question | What the authority ruled |
|---|---|
| Whether proposed back-office support services qualify as Zero Rated Supply under Section 16 of the IGST Act | Answered in the negative. Classified as intermediary services under Section 2(13), placing the location of supply in India under Section 13(8)(b) of the IGST Act. |
The Authority held that the proposed activities constitute facilitating the supply of goods or services between the overseas clients and their customers, bringing the applicant within the definition of an **'intermediary'** under Section 2(13) of the IGST Act, 2017. Consequently, the place of supply is determined by Section 13(8)(b) as the location of the supplier in India. Because the place of supply is not outside India, the services fail to satisfy the conditions of export of services under Section 2(6) and **do not qualify as a Zero Rated Supply** under Section 16.
Reasoning
The Authority examined the scope of work and concluded that the applicant acts on behalf of overseas clients to coordinate transactions with buyers and suppliers rather than supplying services solely on a principal-to-principal basis. Under Section 2(13) of the IGST Act, 2017, an intermediary includes any person who arranges or facilitates the supply of goods or services between two or more persons. Under Section 13(8)(b) of the IGST Act, 2017, the place of supply for intermediary services is the location of the service provider, which is in Maharashtra, India. Therefore, the condition under Section 2(6)(iii) requiring the place of supply to be outside India is not met, disqualifying the transaction from being an export of services or a zero-rated supply under Section 16 of the IGST Act.
Provisions relied on
- Section 16 of the Integrated Goods and Services Tax Act, 2017
- Section 2(6) of the Integrated Goods and Services Tax Act, 2017
- Section 2(13) of the Integrated Goods and Services Tax Act, 2017
- Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017
- Section 97 of the Central Goods and Services Tax Act, 2017
- Section 98 of the Central Goods and Services Tax Act, 2017
For the practitioner
This order illustrates that back-office operational and administrative assistance rendered to foreign clients can be treated as **intermediary services** if the activities involve facilitating transactions between the client and third parties. Tax practitioners should note that establishing a principal-to-principal relationship is critical to claim export of service benefits for support functions.
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/maha-gst-ara-03-b-59_dt.07.07.18_vserv.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.