Tax Dispute Resolved: ITC Refund Claims Remanded for Comprehensive Review of Advisory Services Classification in Export Sector

M/s. Gap International Sourcing (India) Private Limited Versus Additional Commissioner, CGST Appeals- II & Ors.

M/s. Gap International Sourcing (India) Private Limited Versus Additional Commissioner, CGST Appeals- II & Ors. - 2023 (75) G. S. T. L. 24 (Del.) , [2023] ... Issues involved:
The judgment involves a petition challenging various orders related to the refund of unutilized Input Tax Credit (ITC) and the classification of services rendered under different agreements as intermediary services.

Refund of ITC for various periods:
The petitioner challenged orders denying refund of accumulated ITC for different periods, including Financial Year 2018-19 and 2019-20. The Adjudicating Authority initially allowed the refund applications, but the Appellate Authority later overturned these decisions, stating that the petitioner was not entitled to the claimed refund.

Classification of services as intermediary services:
The main issue raised was whether the services provided by the petitioner under an Advisory Services Agreement should be classified as intermediary services. The Appellate Authority determined that the petitioner acted as an agent facilitating the supply of goods to foreign entities, thus falling under intermediary services, which impacted the eligibility for export of services under relevant tax laws.

Details of the judgment:
The High Court considered the nature of services rendered by the petitioner under the Advisory Services Agreement. The petitioner argued that the services involved identifying business opportunities and developing strategies globally, which should not be classified as intermediary services as they were provided on a principal-to-principal basis without involving third parties in the supply chain.

The Court noted that while services related to market research and strategy development may not qualify as intermediary services, there was a dispute regarding the exact nature of the petitioner's services. Considering this, the Court decided to remand the matter back to the Adjudicating Authority for a fresh decision in line with a previous court decision on a similar issue.

Regarding the rejection of a refund claim for a specific period due to alleged errors in turnover computation, the Court found that the Appellate Authority dismissed the claim for lack of documentary evidence supporting the actual eligible turnover for zero-rated supplies. Consequently, the Court set aside the impugned orders and directed the Adjudicating Authority to reconsider the refund applications for the Financial Years 2018-19 and 2019-20 based on the decision in the referenced court case.

In conclusion, the petition was disposed of with the restoration of the refund applications for further consideration by the Adjudicating Authority in light of the Court's directions and relevant legal precedents.