Section 13(8)(b) and 8(2) of IGST Act constitutional but limited to IGST framework, cannot apply to CGST/MGST for export services

Bombay HC held that Section 13(8)(b) and Section 8(2) of IGST Act 2017 are constitutional and valid, but their operation is confined only to IGST Act provisions. The court ruled these sections cannot be applied for levying tax under CGST and MGST Acts on export of intermediary services. The petitioners challenged constitutional validity claiming these provisions wrongly categorized export services as intra-state supplies, leading to double taxation. HC interpreted the provisions to ensure export services remain within IGST Act framework for zero-rated supply benefits, preventing their application under state GST laws.

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Issues Involved:
1. Constitutional validity of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).
2. Constitutional validity of Section 8(2) of the IGST Act.
3. Applicability of Section 13(8)(b) and Section 8(2) of the IGST Act under the Central Goods and Services Tax Act (CGST Act) and Maharashtra Goods and Services Tax Act (MGST Act).

Summary:

Issue 1: Constitutional validity of Section 13(8)(b) of the IGST Act
The petitioners challenged Section 13(8)(b) of the IGST Act, contending it is unconstitutional and violates Articles 14, 19, 245, 246, 246A, 248, 265, 269A, and 286 of the Constitution. The petitioners argued that the section creates a fiction that treats export of services as intra-State supply, which contradicts the destination-based principle of GST. The court observed that Section 13(8)(b) should be confined to the IGST Act and cannot be applied under the CGST and MGST Acts. The court upheld the validity of Section 13(8)(b) within the context of the IGST Act, but it cannot be used to levy tax under the CGST and MGST Acts.

Issue 2: Constitutional validity of Section 8(2) of the IGST Act
The petitioners also challenged Section 8(2) of the IGST Act, arguing it is unconstitutional for similar reasons as Section 13(8)(b). The court held that Section 8(2) is valid within the context of the IGST Act but cannot be applied under the CGST and MGST Acts for taxing export of services.

Issue 3: Applicability of Section 13(8)(b) and Section 8(2) of the IGST Act under the CGST and MGST Acts
The court examined whether the provisions of Section 13(8)(b) and Section 8(2) of the IGST Act could be incorporated into the CGST and MGST Acts. It concluded that these provisions are confined to the IGST Act and cannot be applied under the CGST and MGST Acts. The court emphasized that the IGST Act deals with inter-State trade and commerce, while the CGST and MGST Acts pertain to intra-State supply. Therefore, the fiction created by Section 13(8)(b) should not extend to the CGST and MGST Acts.

Conclusion:
The court upheld the constitutional validity of Section 13(8)(b) and Section 8(2) of the IGST Act, provided they are confined to the IGST Act. These provisions cannot be applied for levy of tax on services under the CGST and MGST Acts. The reference was answered accordingly, and the matter was directed to be placed before the Division Bench.

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