2023 (3) TMI 1117 - HC - GST

Delhi HC grants ITC refund for export services, rejects intermediary classification under Section 2(6) IGST Act

Delhi HC allowed the petition challenging rejection of ITC refund for export of services from December 2017 to March 2020. The petitioner was denied ... Intermediary - place of supply - export of services - Section 2(13) of the IGST Act - Section 2(6) of the IGST Act - Section 13(8)(b) of the IGST ActIntermediary - Section 2(13) of the IGST Act - Whether the services rendered by the petitioner fall within the definition of an intermediary under Section 2(13) of the IGST Act. - HELD THAT: - The court examined the statutory definition which describes an intermediary as one who 'arranges or facilitates' the supply of goods or services between two or more persons and excludes a person who supplies such goods or services on his own account. The Adjudicating Authority's conclusion that the petitioner was an intermediary rested on the premises that the petitioner provided services 'on behalf of' its head office and that the agreements were between the head office and the overseas EY entities. The court rejected this reasoning as misconstruing the definition: a supplier who provides the main service himself (even if partly on behalf of a head office) does not become an intermediary merely because the contract or relationship involves the head office. The court emphasised that an intermediary requires a minimum of three parties and a distinct ancillary supply of facilitation or arrangement, which is absent here where the petitioner itself performed and invoiced the professional services directly to overseas recipients and received payment in convertible foreign exchange. The prior service-tax finding in favour of the petitioner and the similarity of the intermediary definitions under the previous regime and GST were noted as consistent with this interpretation. [Paras 23, 24, 26, 27, 28]The services rendered by the petitioner are not intermediary services within the meaning of Section 2(13) of the IGST Act.Place of supply - export of services - Section 13(8)(b) of the IGST Act - Section 2(6) of the IGST Act - Whether the place of supply of the services is India by virtue of being intermediary services and whether the services qualify as export of services under Section 2(6) of the IGST Act. - HELD THAT: - Section 13 provides that the place of supply of services is generally the location of the recipient, except for specified services (including intermediary services) where the place of supply is the location of the supplier. Because the court concluded that the petitioner did not provide intermediary services, Clause (b) of Section 13(8) is inapplicable. Consequently, the place of supply must be determined under the general rule and is the location of the recipient. The facts show that the recipients (EY Entities) are located outside India and payment was received in convertible foreign exchange. These elements satisfy the conditions of Section 2(6) for 'export of services'. The court therefore held that the services are exports and rejected the authorities' characterization that placed supply in India on intermediary grounds. [Paras 31, 32, 33, 34]The place of supply is the location of the overseas recipients and the services qualify as export of services under Section 2(6) of the IGST Act.Refund of input tax credit - Whether the impugned orders rejecting the petitioner's refund claims for the stated periods should be set aside and the refund applications processed. - HELD THAT: - Having held that the petitioner's services are exports, the legal foundation for denial-treatment as intermediary services with place of supply in India-fails. The court noted the petitioner had earlier secured favourable findings under the service tax regime and that refund/ITC claims for periods after March 2020 had been allowed. Given the legal conclusion that the supplies were exports, the impugned orders denying refund for the specified periods lacked merit. The court therefore set aside the impugned appellate and original orders and directed the adjudicating authority to process the refund applications expeditiously. [Paras 29, 35]The impugned orders-in-original and the impugned order-in-appeal are set aside and the Adjudicating Authority is directed to process the petitioner's refund applications expeditiously.Final Conclusion: The writ petition is allowed: the courts below erred in treating the petitioner as an intermediary; the services supplied to overseas EY entities qualify as export of services and the orders denying refund are set aside with a direction to process the refund claims for the stated periods expeditiously. Issues Involved:1. Timeliness and jurisdiction of the refund claim.2. Filing of GSTR-1 and GSTR-3B.3. Classification of services as export of services.4. Submission of required documents and compliance with conditions.Summary:Issue 1: Timeliness and Jurisdiction of the Refund ClaimThe Adjudicating Authority found that the refund claim had been filed within the stipulated time and with the correct jurisdictional authority.Issue 2: Filing of GSTR-1 and GSTR-3BThe petitioner had filed GSTR-1 (Table-6A) and GSTR-3B for the relevant periods, as required.Issue 3: Classification of Services as Export of ServicesThe core issue was whether the services rendered by the petitioner to EY Entities constituted intermediary services, which would affect the place of supply. The Adjudicating Authority and the Appellate Authority had concluded that the petitioner was an intermediary, thus placing the supply of services in India. However, the High Court disagreed, stating that the petitioner provided services directly to EY Entities and did not arrange or facilitate services from third parties. Therefore, the petitioner was not an intermediary under Section 2(13) of the IGST Act. Consequently, the place of supply was the location of the recipient (EY Entities), which is outside India, qualifying the services as export of services under Section 2(6) of the IGST Act.Issue 4: Submission of Required Documents and Compliance with ConditionsThe petitioner had submitted all necessary documents and met the conditions specified under Rule 89 of the CGST Act and Circular No. 125/44/2019-GST.Conclusion:The High Court concluded that the services provided by the petitioner were not intermediary services and thus qualified as export of services. The impugned orders were set aside, and the Adjudicating Authority was directed to process the petitioner's refund application expeditiously.