2023 (3) TMI 1117 - HC - GST

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

M/s. Ernst And Young Limited Versus Additional Commissioner, CGST Appeals -II, Delhi And Anr.

Delhi HC allowed the petition challenging rejection of ITC refund for export of services from December 2017 to March 2020. The petitioner was denied ... Rejection of refund for input tax credit (ITC) in respect of export of services for the period from December 2017 to March 2020 - denial on the premise that the petitioner is an ‘intermediary’ and thus, the place of services is located in India, where the petitioner’s place of business is located and not where recipient of services is located. Whether the Service rendered by the petitioner to EY Entities in terms of the service agreement constitutes services as an ‘intermediary’? - HELD THAT:- The services rendered by the petitioner to EY Entities, prior to roll out of the GST regime, was considered as ‘export of services’. The petitioner prevailed before the concerned service tax authorities in establishing that the professional services rendered by it cannot be considered as services as an ‘intermediary’. It is also material to note that the petitioner’s application for refund of ITC for the period after March 2020 has also been accepted by the Adjudicating Authority. Thus, the petitioner has been denied ITC only for the period from December 2017 to March 2020; it has been allowed CENVAT credit for the period covered under the service tax regime as well as ITC for the period after March 2020. In terms of Sub-section (8) of Section 13 of the IGST Act, the place of supply of certain services would be the location of the supplier of the services. In terms of Clause (b) of Sub-section (8) of Section 13 of the IGST Act, the place of supply of intermediary services is the location of the supplier of services. In the present case, the place of supply of services has been held to be in India on the basis that the petitioner is providing intermediary services - the Services rendered by the petitioner are not as an intermediary and therefore, the place of supply of the Services rendered by the petitioner to overseas entities is required to be determined on basis of the location of the recipient of the Services. Since the recipient of the Services is outside India, the professional services rendered by the petitioner would fall within the scope of definition of ‘export of services’ as defined under Section 2(6) of the IGST Act. There is no dispute that the recipient of Services – that is EY Entities – are located outside India. Thus, indisputably, the Services provided by the petitioner would fall within the scope of the definition of the term ‘export of service’ under Section 2(6) of the IGST Act. The impugned order as well as the impugned orders-in-original are set aside - Petition allowed. 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.