Intermediary service to non-resident- validity of s.13(8)(b) of IGST Act

This is with reference to the example in the above Article stating, suppose A is the intermediary in India providing service to B in London, who supplies the goods to C in India. In this situation, the author has considered the net effect of two transactions, i.e. transaction between A & B; and B & C. Thereafter, it has been argued that the net effect is outflow of foreign exchange of 45,000 USD (50,000 minus 5,000).

In my humble view this is not proper logic. Suppose, after getting and using imported machinery worth USD 50,000 (supplied by B), C manufactures and exports goods worth USD 5,00,000 in next 3 years. Then, can it be said that the net effect is inflow of foreign exchange of USD 4,55,000 (5,00,000 minus 45,000)?

Looking from another angle, C has paid Custom duties on the value of USD 50,000 while importing machinery; whereas, C would get export benefits on the value USD 5,00,000 while exporting goods. These values of import and export have not been affected by the Commission of USD 5,000 earned by the Indian intermediary A from the foreign supplier B. In the trade, there are series of transactions depending upon one another; however, taxability depends upon nature and place of every transaction by treating it as individual transaction.

Thus, in my PERSONAL VIEWS, Indian intermediary A, who provides service to foreign Supplier B (resulting into inflow of foreign exchange), should not be deprived from export benefit merely by considering the transaction between B and C (which results into outflow of foreign exchange).

Shvetal Parikh 12/06/2021