BPO service provider wins refund claim after being wrongly classified as intermediary under Section 2(13) IGST Act

The Punjab and Haryana HC allowed a petition challenging denial of refund claim for unutilized Input Tax Credit on zero-rated export services. The petitioner, a BPO service provider, was wrongly classified as an intermediary under Section 2(13) of IGST Act by tax authorities. The court held that the Master Service Agreement clauses merely outlined work modalities and did not establish the petitioner as facilitating third-party services. The petitioner directly rendered services rather than arranging/facilitating services through others. Consequently, the services qualified as export of services under Section 2(6) IGST Act, making the petitioner eligible for ITC refund under Section 54 CGST Act. The impugned order dated 15.02.2021 was set aside.

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Issues Involved:
1. Whether the petitioner qualifies as an "intermediary" under Section 2(13) of the IGST Act.
2. Whether the services provided by the petitioner qualify as "export of services" under Section 2(6) of the IGST Act.
3. Whether the petitioner is entitled to a refund of unutilized Input Tax Credit (ITC) under Section 54 of the CGST Act.

Issue-Wise
Detailed Analysis:

1. Whether the petitioner qualifies as an "intermediary" under Section 2(13) of the IGST Act:
The primary issue is whether the petitioner, a Business Process Outsourcing (BPO) Service Provider, falls under the definition of "intermediary" as per Section 2(13) of the IGST Act. The court examined the Master Services Sub-Contracting Agreement (MSA) between the petitioner and Genpact International Incorporated (GI). The MSA indicated that the petitioner provides services directly to GI's customers and not as an intermediary. The court emphasized that for a person to qualify as an intermediary, three conditions must be met: a principal-agency relationship, involvement in arranging or facilitating services provided by a third party, and not performing the main service. The court found that the petitioner performs the main service on its own account and does not facilitate services between GI and its customers. Therefore, the petitioner does not qualify as an intermediary.

2. Whether the services provided by the petitioner qualify as "export of services" under Section 2(6) of the IGST Act:
The court analyzed whether the services provided by the petitioner qualify as "export of services" under Section 2(6) of the IGST Act. The court noted that the petitioner provides services from India to customers located outside India, receives payment in convertible foreign exchange, and the place of supply is outside India. The court referenced previous orders and circulars, including a circular dated 20.09.2021, which clarified that sub-contracting arrangements do not constitute "intermediary services." The court concluded that the services provided by the petitioner qualify as "export of services" and are zero-rated supplies under Section 16 of the IGST Act.

3. Whether the petitioner is entitled to a refund of unutilized Input Tax Credit (ITC) under Section 54 of the CGST Act:
The petitioner filed for a refund of unutilized ITC amounting to Rs. 26,34,61,625/- for the period from July 2017 to March 2018. The court examined the relevant statutory provisions, including Section 54 of the CGST Act, which prescribes the manner for claiming refunds. The court found that the petitioner met the conditions for claiming a refund of unutilized ITC for zero-rated supplies. The court referenced an earlier order dated 25.01.2018, which granted a refund to the petitioner under similar circumstances. The court emphasized the principle of consistency in tax proceedings and concluded that the petitioner is entitled to the refund of unutilized ITC.

Conclusion:
The court quashed the impugned order dated 15.02.2021, holding the petitioner as an intermediary, and restored the order in original dated 14.03.2019, granting a refund of Rs. 26,34,61,625/- to the petitioner. The court also directed that the benefit of this order shall apply to subsequent refund claims by the petitioner. The writ petition was allowed in the aforesaid terms.

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