TaxTMI 
TaxTMI 
The distinction between export of services and intermediary services under the Goods and Services Tax (GST) regime has remained one of the most litigated issues in indirect taxation. The classification of a service directly impacts the availability of export benefits, including refund of Integrated Goods and Services Tax (IGST) or unutilized Input Tax Credit (ITC). A recent decision of the Bombay High Court in Lubrizol Advance Materials India Pvt. Ltd. Versus Union of India & Ors. - 2026 (3) TMI 578 - BOMBAY HIGH COURT highlights the importance of a proper examination of contractual arrangements before denying refund claims on the ground that the supplier is an intermediary under Section 13(8) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).
Background of the Case
The petitioner, Lubrizol Advance Materials India Pvt. Ltd., is a part of a multinational corporate group and provides administrative and sales support services to its overseas group entities. These services were rendered under cost-plus arrangements, and the petitioner received consideration in convertible foreign exchange.
For the tax period of July 2024, the petitioner filed an application in Form GST RFD-01 seeking refund of the IGST paid on the export of services under Section 54 of the Central Goods and Services Tax Act, 2017.
Instead of issuing a deficiency memo seeking clarification or additional documents, the tax authorities issued a show cause notice proposing rejection of the refund claim. The principal allegation was that the petitioner was providing intermediary services within the meaning of Section 13(8)(b) of the IGST Act. Since the place of supply of intermediary services is deemed to be the location of the supplier, the department contended that the services did not qualify as 'export of services' under Section 2(6) of the IGST Act. Consequently, the refund application was rejected through an order issued inForm GST RFD-06.
Aggrieved by the rejection, the petitioner approached the Bombay High Court by filing a writ petition.
Issues Before the Court
The central issue before the Court was whether the refund claim could be rejected merely by treating the petitioner as an intermediary without properly examining the contractual arrangements governing the services.
The petitioner argued that the refund rejection order suffered from several legal infirmities. It contended that the adjudicating authority had failed to consider the terms of the service agreements, the true nature of the services rendered, and the legal implications of Section 13(8) of the IGST Act.
The petitioner also relied upon earlier findings rendered under the Service Tax regime wherein similar activities had been held not to constitute intermediary services. Further, reliance was placed on relevant CBIC circulars and judicial precedents explaining the distinction between principal-to-principal support services and intermediary services.
The petitioner further alleged that the refund proceedings violated the principles of natural justice, as its detailed submissions had not been properly examined before passing the adverse order.
Legal Framework
Section 54 of the CGST Act provides for refund of tax paid on zero-rated supplies, including exports of goods and services.
For a transaction to qualify as an export of services under Section 2(6) of the IGST Act, one of the essential conditions is that the place of supply must be outside India.
However, Section 13(8)(b) of the IGST Act provides a special rule for intermediary services by deeming the place of supply to be the location of the supplier. If a service qualifies as an intermediary service, it may cease to satisfy the conditions for export of services, thereby denying refund benefits.
Consequently, determining whether a service provider acts as an intermediary or renders services on its own account assumes significant importance.
Findings of the Bombay High Court
The Bombay High Court did not decide whether the petitioner was, in fact, an intermediary. Instead, it found that the refund rejection order had been passed without adequately considering the material placed on record.
The Court observed that the adjudicating authority had failed to properly analyze the contractual terms governing the services rendered by the petitioner. Equally important, it had not examined the applicability of Section 13(8) in light of the agreements between the parties, the relevant CBIC circulars, and the judicial principles laid down in earlier High Court decisions.
The Court noted that a similar approach had recently been adopted in another comparable matter involving analogous issues. During the hearing, the Revenue also fairly agreed that the matter could be remanded for fresh consideration.
Accordingly, the Bombay High Court set aside the impugned refund rejection order and remanded the matter to the competent authority for fresh adjudication.
The Court directed the authority to reconsider the refund application after granting the petitioner a reasonable opportunity of hearing and after examining all contractual documents, statutory provisions, circulars, and judicial precedents. Importantly, the Court clarified that all contentions of both the petitioner and the Revenue were kept open for consideration in the remanded proceedings.
Significance of the Judgment
Although the judgment does not conclusively determine the scope of intermediary services, it reinforces an important principle of tax administration-that refund claims cannot be rejected through mechanical or superficial reasoning.
The decision emphasizes that authorities must carefully evaluate the actual nature of the services, the contractual obligations of the parties, and the substance of the transaction before invoking Section 13(8) of the IGST Act.
The judgment also underlines the importance of adhering to the principles of natural justice. A speaking order dealing with every significant contention raised by the taxpayer is essential, particularly in refund matters where valuable statutory rights are involved.
For multinational enterprises providing back-office, administrative, marketing support, or shared services to overseas affiliates, the ruling serves as a reminder that classification as an intermediary cannot be based merely on the nomenclature of services. The true nature of the contractual relationship and the role performed by the service provider remain decisive factors.
Conclusion
The decision in Lubrizol Advance Materials India Pvt. Ltd. Versus Union of India & Ors. - 2026 (3) TMI 578 - BOMBAY HIGH COURT. reiterates that refund claims involving the complex distinction between export of services and intermediary services require detailed legal and factual examination. The Bombay High Court rightly held that the adjudicating authority must consider contractual terms, statutory provisions, CBIC circulars, and relevant judicial precedents before arriving at any conclusion regarding the applicability of Section 13(8) of the IGST Act.
By setting aside the refund rejection order and directing a fresh adjudication, the Court reinforced the principles of fairness, reasoned decision-making, and due process. The judgment is likely to provide valuable guidance in future disputes concerning export benefits for multinational service providers and contributes to the evolving jurisprudence on intermediary services under the GST regime.
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