OWN-ACCOUNT SUPPLY KEEPS THE EXPORT CHARACTER ALIVE

The Real Test Is Who Supplies the Service on Own Account

The dispute over intermediary services has repeatedly troubled exporters of services, particularly those engaged in BPO, back-office support, IT helpdesk, sourcing support, marketing support and group-service arrangements. The Department often looks to the end customer who receives the practical benefit of the service. Taxpayers, on the other hand, point to the contract, the flow of consideration and the person to whom the service is legally supplied. The decision in M/s Genpact Services LLC Versus Commissioner of Central Goods & Service Tax, Gurugram - 2026 (7) TMI 97 - CESTAT CHANDIGARH, again brings the focus back to the correct test.

The central question is not whether some third party ultimately benefits from the work performed in India. In modern global service models, that will often happen. The real question is whether the Indian entity is providing the service on its own account to the overseas contracting party, or merely arranging or facilitating a supply between two other persons. If the Indian entity itself performs the contracted service and receives consideration from the overseas party, it does not become an intermediary merely because the overseas party has its own customers.

The Tribunal allowed the appeals and restored the export character of the services. It held that the appellant was not an intermediary under Rule 2(f) read with Rule 9(c) of the Place of Provision of Services Rules, 2012. Consequently, the denial of a refund of accumulated CENVAT credit could not stand. The ruling is under the service tax regime, but its reasoning is equally valuable for GST disputes, especially after the recent change in the place-of-supply treatment of intermediary services.

The Contract Showed Service to GI, Not Facilitation for Customers

The appellant, Genpact Services LLC, had an Indian branch that provided back-office support, call centre, back-office management, and IT helpdesk services. These services were rendered under a Master Services Sub-Contracting Agreement dated 01.01.2013 with Genpact International Inc., USA (referred to as GI). GI was located outside India and had overseas customers. The appellant performed certain services under the contract with GI.

The Department treated the appellant as an intermediary on the ground that the services were ultimately connected with GI's customers. However, the key contractual features pointed in another direction. The appellant had no agreement with GI's overseas customers. The appellant was remunerated by GI. The relationship between GI and the appellant was on a principal-to-principal basis. GI may have been answerable to its own customers, but the appellant was contractually answerable to GI.

This distinction is vital. A person who provides a service to A does not become an intermediary merely because A uses that service to serve B. In commercial reality, many services are part of a larger service chain. A subcontractor, support service provider, or group entity may perform work that assists the main contractor in discharging obligations to its customers. That alone does not mean the support service provider is arranging or facilitating a supply between the main contractor and the customer. The law requires a deeper enquiry into the nature of the supply.

Intermediary Means Arranging or Facilitating, Not Performing the Main Service

The definition of intermediary under Rule 2(f) of the POPS Rules, 2012, covers a person who arranged or facilitated the provision of a service between two or more persons. The concept therefore has a built-in distinction. An intermediary stands between two parties and helps them receive or provide a service. A person who supplies the main service on his own account is different. That person is not merely connecting two others; he is himself performing the contracted obligation.

In the present case, the appellant was not sourcing another service provider for GI. It was not arranging a separate supply by a third person. It was not merely introducing GI to its customers or enabling a transaction between GI and those customers. It was itself providing BPO and IT support services under the MSA. Therefore, the essential character of an intermediary was absent.

The distinction between own-account service and facilitation is the heart of intermediary law. If the Indian entity uses its own employees, systems, infrastructure and processes to provide the agreed service to the overseas principal, the service is ordinarily on its own account. The fact that the output of that service is useful to the overseas principal's customers does not alter the legal recipient of the service or transform the supplier into an intermediary.

End-Customer Benefit Cannot Override Contractual Reality

The Revenue's approach treated the overseas customers of GI as the real recipients because they received the practical benefit of the appellant's work. The Tribunal rejected this line of reasoning. In service tax and GST, benefit may be relevant, but it cannot override the contract, the payment flow and the legal obligation undertaken by the parties. A person may benefit from a service without being the contractual recipient of that service.

This is especially true in the outsourcing industry. An overseas company may contract with an Indian entity for back-office support, customer support, data processing or IT helpdesk functions. The work may be performed in relation to the overseas company's customers. However, the Indian entity may still be supplying the service to the overseas company. The overseas company remains the contracting party, the payer and the recipient in law.

If end-customer benefit alone were enough to create intermediary status, almost every offshore support arrangement would become vulnerable. That would defeat the basic structure of export of services. The correct approach is to ask whether the Indian entity is independently performing the service promised to the overseas principal or merely facilitating a separate supply between the overseas principal and another person.

Binding High Court Reasoning Anchored the Tribunal's Conclusion

A major reason for the Tribunal's conclusion was the earlier Punjab and Haryana High Court judgment in Genpact India Pvt. Ltd. Versus Union of India and others - 2022 (11) TMI 743 - PUNJAB AND HARYANA HIGH COURT . That case involved Genpact India Pvt. Ltd., a group company that had entered into an identically worded agreement with GI. The High Court examined the agreement and held that the entity was not an intermediary.

The significance of this judgment was further underscored by subsequent events. The Revenue did not challenge the judgment before the Supreme Court and also granted refunds thereafter. In a subsequent matter, Genpact India Pvt. Ltd. Versus Principal Commissioner of GST and CX, Gurugram and another - 2023 (8) TMI 1210 - PUNJAB AND HARYANA HIGH COURT, the Punjab and Haryana High Court set aside a show cause notice for the period April 2012 to June 2017, where the Department again sought to deny export treatment and recover refunds on the intermediary theory.

The Tribunal therefore did not treat the issue as an open factual debate. The agreement in the present case was materially identical to the agreement already examined by the High Court. The High Court had already rejected the intermediary allegation. In such circumstances, consistency required the same principle to be followed unless there was a material distinguishing feature. No such distinguishing feature was shown.

Refund Cannot Be Denied Once the Intermediary Label Falls

The appellant had claimed a refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No. 27/2012-C.E. (N.T.) dated 18.06.2012. The refund sanctioning authority had allowed three refund claims for different periods, aggregating to Rs.14,55,37,036/-. The Commissioner (Appeals), however, reversed the refund orders, holding that the appellant was an intermediary and that the place of provision was India under Rule 9(c) of the POPS Rules.

Once the intermediary finding failed, the foundation of refund denial collapsed. Rule 9(c) could not be used to bring the place of provision to India. Once Rule 9(c) was held inapplicable, the services had to be examined under the normal export-of-services framework. The services were provided to an overseas principal and were treated as an export of services, subject to fulfilment of the applicable conditions. Therefore, denial of a refund on the intermediary ground could not be sustained.

The case shows how powerful a classification label can be in refund disputes. The entire refund turned on whether the appellant was an intermediary. If the label was correct, the export benefit would fail. If the label was wrong, the refund denial would fail. This is why intermediary disputes require careful reading of the contract and not merely a broad impression of who ultimately benefits from the service.

The Tribunal's Own Line of Decisions Reinforced the Export View

The Tribunal also referred to its decision in M/s William E Connor and Associates Sourcing Private Limited Versus The Commissioner of Central Goods & Service Tax, Gurugram - 2025 (5) TMI 1898 - CESTAT CHANDIGARH In that case, the Tribunal followed the Punjab and Haryana High Court's reasoning and rejected the intermediary allegation where the Indian entity supplied services on its own account to an overseas principal.

The Tribunal also referred to M/s Oceanic Consultants Pvt. Ltd. Versus Commissioner or Central Excise And Service Tax, Chandigarh-I - 2024 (8) TMI 399 - CESTAT CHANDIGARH. The common legal thread in these decisions is that a service provider does not become an intermediary merely because the service is connected with another person's customers or business. The decisive enquiry is whether the supplier itself provides the main service or only arranges or facilitates a third-party supply.

This line of decisions is important for the outsourcing sector. It prevents the intermediary concept from being stretched so widely that it swallows genuine export of services. If every Indian service provider supporting an overseas group company were treated as an intermediary, the export benefit for a large part of the services industry would become uncertain. The Tribunal's approach preserves the distinction between facilitation and independent performance.

The GST Connection Became Even More Important After 30.03.2026

Although the decision arises under the service tax regime, its underlying principle applies equally in GST litigation. The core test remains whether the Indian entity supplies the service on its own account to the overseas recipient, or merely arranges or facilitates a supply between two other persons. The contract, the flow of consideration, privity with third- party customers, and the nature of actual performance remain decisive.

This principle has become even more significant after the omission of Section 13(8)(b) of the IGST Act with effect from 30. 03. 2026. Intermediary services are no longer carved out under that special place-of-supply provision and would ordinarily fall within the scope of examination under the general provision in Section 13(2), subject to the facts and the applicable statutory provisions. Therefore, the intermediary character of the service provider must be analysed with greater care and not assumed merely from the existence of an overseas customer base.

A useful GST- side reference may also be made to M/s. Dow Chemical International Private Ltd., Through Its Director, Shri Rahunathangavel Versus Commissioner Of State Tax, Mazgaon, Mumbai Asheesh Sharma & Ors. - 2026 (6) TMI 375 - GSTAT NEW DELHI-[PB]. That ruling also concerned the distinction between intermediary services and export of services. It reinforces the same practical test: the contract, the actual role of the Indian entity, the flow of consideration, and whether the service is supplied on its own account are decisive. Merely because an overseas group entity or its customers commercially benefit from the Indian entity's work, the transaction cannot automatically be treated as an intermediary service.

In GST disputes involving BPO, back-office, IT support, sourcing, marketing support, or group-service arrangements, officers and taxpayers should first read the agreement. Who is the contracting party? Who pays consideration? Does the Indian entity contract with the overseas principal's customers? Is the Indian entity arranging a service by someone else, or performing the service itself? These questions will often decide the dispute.

Documentation Must Match the Real Supply

For taxpayers and professionals, the practical lesson is simple. The agreement, invoices, work orders and accounting records should clearly show who receives the service, who pays consideration and whether the Indian entity has any privity with the overseas principal's customers. If the Indian entity is truly providing services on its own account, the documentation should not loosely use language suggesting agency, brokerage or facilitation.

For officers, the finding of an intermediary cannot rest merely on the fact that third-party customers benefit from the work. The real enquiry must be whether the Indian entity performs the contracted service itself or only arranges/facilitates a supply between others.

Own-Account Supply Is the Shield Against the Intermediary Label

Genpact Services LLC restores discipline to the intermediary analysis. The presence of three parties in a commercial chain does not automatically create an intermediary. If the Indian entity performs the contracted service on its own account for the overseas principal, receives consideration from that principal and has no contractual relationship with the principal's customers, the intermediary label should not be applied mechanically.

The ruling protects genuine offshore support services by focusing on legal supply and actual performance, not merely on who ultimately receives commercial benefit. Intermediary classification is not a shortcut for denying export benefit; it requires proof that the Indian entity arranged or facilitated a supply between others.

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CA. RAJ JAGGI

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