2025 (9) TMI 734 - HC - GST

Services not taxable as intermediary; two party arrangement qualifies as export, respondents ordered to accept export classification

Idp Education India Pvt. Ltd., Versus The Union Of India, Joint Commissioner (Appeals), C.E. And CGST Jaipur, Deputy Commissioner, Cgst Division-H, Central Excise Jaipur, The State Of Rajasthan.

HC held that the petitioner's services are not taxable as an 'intermediary' but qualify as 'export' because the arrangement involves only two ... Levy of GST - services supplied by petitioner qualifies as “intermediary” as alleged by the Department or do they qualify as “export” as the place of provision of services being outside taxable territory? - HELD THAT:- Having considered the judgment of the Hon’ble Bombay High Court in petitioner’s own case in IDP Education India Pvt. Ltd. [2025 (5) TMI 729 - BOMBAY HIGH COURT] with which it is respectfully agreed with, it is clear that the services provided by petitioner are qua IDP Australia under specific contract or arrangement with it. Not more than two parties are involved in this arrangement, namely, petitioner and IDP Australia. For someone to be called an “Intermediary”, there needs to be existence of three parties in the contract, in the absence of which, petitioner cannot be called as “Intermediary”. In the present case, the services rendered by petitioner are only to IDP Australia and, therefore, certainly qualifies to be “Export” as held by CESTAT in the order referred above and the Hon’ble Bombay High Court. Thus, when petitioner has been considered as an exporter in other State jurisdictions, there is no reason for respondents to take a different view. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the services supplied by the petitioner during the relevant periods qualify as an 'intermediary' under Section 2(13) of the IGST Act or qualify as 'export of services' under Section 2(6) of the IGST Act with place of provision outside the taxable territory. 2. Whether, consequent to classification as intermediary or exporter, the petitioner is entitled to refund of IGST paid for zero-rated supply under Section 16(3)(b) of the IGST Act. 3. Whether contractual clauses stating fees are inclusive of taxes preclude claim of zero-rated export treatment/refund under Section 16(3)(b) where the supplier is not an intermediary. ISSUE-WISE DETAILED ANALYSIS Issue 1: Characterisation as 'intermediary' vs 'export of services' Legal framework: - Definition of 'intermediary' under Section 2(13) of the IGST Act: person who arranges or facilitates supply of services between two or more persons (broker/agent), with explicit exclusion of a person who supplies any service on his own account. - Definition of 'export of services' under Section 2(6) of the IGST Act and entitlement to zero-rated treatment/refund under Section 16(3)(b) IGST Act where place of provision is outside India. Precedent Treatment (followed/distinguished/overruled): - The Court follows a prior adjudicatory finding (CESTAT) holding identical services not to be intermediary and endorses an analogous High Court decision reaching the same conclusion; it also relies on CBIC/Central Board Circular observing continuity of intermediary scope between Service Tax and GST regimes. Interpretation and reasoning: - The Court examines the contractual matrix: petitioner is a contracted service provider to the principal (IDP Australia) under a bi-partite agreement, performing student placement, guidance, counseling and enrollment-related services for the principal. - The arrangement is described as principal-to-principal/sub-contracting where petitioner has no contractual relationship with foreign universities or students, and no authority or role in final admission decisions (ultimate authority vested in IDP Australia). - The Court emphasizes that an 'intermediary' presupposes facilitation or arrangement among three or more parties (i.e., arranging/facilitating supply between two other persons). Where services are provided by a supplier directly to a principal on the supplier's own account under a bi-partite contract, the statutory exclusion of persons supplying services 'on his own account' applies. - The Court finds the impugned authority erred in characterizing petitioner as an intermediary by attributing a facilitation/arrangement role vis-à-vis foreign universities and students; factual matrix shows petitioner did not arrange or determine admissions and had no contractual nexus with the universities or students. Ratio vs. Obiter: - Ratio: Where a service provider supplies services pursuant to a bi-partite contract to a principal and does not arrange or facilitate supply between two other persons, it does not qualify as an 'intermediary' under Section 2(13) IGST; such services may qualify as export of services if other conditions (place of supply outside taxable territory) are met. - Obiter: Observations on periodic renewal of agreements and wide acceptance by other jurisdictions are supportive but not the essential legal principle beyond the ratio stated above. Conclusions: - The Court holds the petitioner is not an 'intermediary' within the meaning of Section 2(13) IGST Act because (i) only two parties (petitioner and principal) are involved in the contractual relationship, (ii) petitioner supplies services on its own account to the principal, and (iii) petitioner lacks contractual authority vis-à-vis foreign universities or students. Issue 2: Entitlement to refund of IGST under Section 16(3)(b) upon classification as export Legal framework: - Section 16(3)(b) IGST Act permits refund of IGST paid on zero-rated supplies of services classified as export where place of supply is outside India and other statutory conditions are satisfied. Precedent Treatment (followed/distinguished/overruled): - The Court treats the CESTAT determination and the High Court decision in a co-ordinate jurisdiction as precedent supporting entitlement to refund where services are not intermediary in nature; it notes CBIC circular affirming continuity of intermediary concept across regimes. Interpretation and reasoning: - Having determined that the petitioner is not an intermediary, the predicate for denying export status (i.e., that place of supply would be in India because of intermediary characterization) falls away. - The Court rejects Respondent's reliance on clauses stating fees are inclusive of taxes as determinative of entitlement to zero-rated treatment; the entitlement to refund hinges on statutory classification (intermediary vs exporter) rather than a contractual tax-inclusion clause alone. - The Court notes the petitioner's prior favorable determinations in other periods and jurisdictions and holds there is no reason for inconsistent treatment; where petitioner qualifies as exporter, refund must follow subject to statutory processes. Ratio vs. Obiter: - Ratio: If services are not intermediary and otherwise satisfy statutory conditions for export of services, the supplier is entitled to refund of IGST under Section 16(3)(b) IGST Act; contractual stipulations about tax inclusivity do not automatically negate statutory refund entitlement when the supplier is not an intermediary. - Obiter: References to sanctioned refunds in other jurisdictions and acceptance by revenue are corroborative but not necessary to the legal holding. Conclusions: - The Court directs remand to the Adjudicating Authority to process the petitioner's refund claim and to pay the refund along with applicable interest within four weeks from upload of the order, since the petitioner is held to be an exporter and not an intermediary. Issue 3: Effect of contractual clause stating fees are inclusive of taxes Legal framework: - Contractual allocation of tax liability does not supplant statutory classification of supply under IGST Act; entitlement to zero-rated status and refund under Section 16(3)(b) depends on statutory criteria. Interpretation and reasoning: - The Court considers the submission that agreement clause making fees inclusive of taxes precludes zero-rating but finds it not determinative where statutory classification (non-intermediary/export) is established. Ratio vs. Obiter: - Ratio: A contractual clause making fees inclusive of taxes does not, by itself, prevent entitlement to zero-rated export treatment and refund where the supply qualifies as export under IGST provisions and the supplier is not an intermediary. Conclusions: - The Court rejects the revenue's contention based solely on the tax-inclusive fee clause as a basis to deny refund once petitioner is held not to be an intermediary; refund must be processed as ordered. Remedy and operative directions (consequential to findings) - The Court allows the petitions, holds that petitioner's services qualify as export (not intermediary), and remands the matter to the Adjudicating Authority to process and sanction the refund claim of IGST along with applicable interest within four weeks from date of uploading of the order. - No order as to costs.