2025 (10) TMI 371 - HC - GST

Provider deemed educational consultant, not 'intermediary' under IGST Act; services to overseas recipients treated as export

The HC held that the provider operates as an educational consultant and not as an 'intermediary' under the IGST Act, since it does not act on behalf of ... Grant of tax refund claimed for export of services - export of services in terms of the agreements which the Respondent enters into with Foreign Educational Institutions - intermediary in terms of Section 2(13) of the Integrated Goods and Services Tax Act, 2017 or not - HELD THAT:- In the case of Ernst & Young Ltd [2023 (3) TMI 1117 - DELHI HIGH COURT] it has been categorically held that a person who supplies the goods and services is not an ‘intermediary’. It is only a person who arranges or facilitates the said services who would be considered as an ‘intermediary’. Thus, since the recipient of the services provided by the Petitioner therein, was located outside India, the services provided by the Petitioner therein were held to be export of service under Section 2(6) of the IGST Act. A similar situation has arisen in the case of Commissioner of Central Excise and Service Tax, Chandigarh-I [2025 (4) TMI 1647 - SC ORDER] wherein the Supreme Court dismissed the SLP against a decision by CESTAT wherein it was held that when services are rendered to students in India, foreign universities which pay the commission to such a person as the Respondent cannot be considered as an ‘intermediary’. Coming to the facts of the present case, the Respondent is clearly engaged in educational consultancy services. The Respondent does not act on behalf of any FEI. The Respondent is in fact, engaged by the said FEI for providing consultancy services to students in India and upon the said students obtaining education, the Respondent raises invoices in either Indian Rupees or foreign currency upon the said university/FEI. The Respondent then receives foreign exchange payment from the said university. This relationship between the Respondent and the university or the FEI cannot be held to be an intermediary service as the Respondent is working as an educational consultant and may be rendering services which may further the cause of the FEI but is not an agent of the said FEI. The ‘intermediary services’ are no longer services for which the place of location of the supplier would be deemed as the place of supply. Even for such services the place of the recipient of the services would be place of supply as per Section 13(2) of the IGST Act. The confusion that was prevalent relating to intermediaries and their entitlement to claim benefits on the basis of export of services is eliminated. The present writ petition does not deserve to be entertained and is, accordingly, dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the services provided by an Indian educational consultant to foreign educational institutions qualify as 'export of services' under Section 2(6) of the IGST Act. 2. Whether the said consultant falls within the definition of 'intermediary' under Section 2(13) of the IGST Act, thereby affecting place of supply under Section 13(8) and entitlement to export benefits. 3. Whether the Appellate Authority erred in allowing refund claims of tax paid on such services notwithstanding earlier rejection by the Adjudicating Authority. ISSUE-WISE DETAILED ANALYSIS - I. EXPORT OF SERVICES (SECTION 2(6) IGST ACT) Legal framework: Section 2(6) defines 'export of services' by five cumulative conditions: (i) supplier located in India; (ii) recipient located outside India; (iii) place of supply outside India; (iv) payment received in convertible foreign exchange (or INR as permitted); and (v) supplier and recipient are not merely establishments of a distinct person. Section 13(2) determines place of supply as location of recipient, subject to exceptions; Section 13(8) (as read prior to recommended amendment) treated intermediary services as having place of supply at supplier's location. Precedent treatment: Co-ordinate Bench decisions (treated and followed) have held that a person who actually supplies services (as distinct from arranging/facilitating) is not an intermediary and therefore may qualify for export of services where recipient is abroad and other conditions met. The reasoning in these authorities has been followed by other High Courts and affirmed by the Supreme Court by dismissal of SLPs, demonstrating acceptance of the principle that contractual privity and who is liable to pay determine the recipient for place-of-supply purposes. Interpretation and reasoning: The Court analysed the contractual matrix and commercial reality: the consultant contracts with foreign institutions, provides consultancy services in India to facilitate admission of Indian students, invoices the foreign institutions and receives payment in foreign exchange. The services are supplied to the foreign institutions (recipients located outside India) and payment is received in convertible foreign exchange. The consultant is not supplying services to the students in India for consideration; rather, the benefit flowing to the foreign institutions and the contractual obligation to pay the consultant make the foreign institutions the recipients. The statutory definition of 'recipient' and the place-of-supply rules (Sections 2(6) and 13) are to be read as a whole and in commercial context rather than by focusing on incidental domestic use. Ratio vs. Obiter: Ratio - Where an Indian consultant renders services under contract to foreign educational institutions, invoices those institutions and receives consideration in convertible foreign exchange, such services qualify as 'export of services' under Section 2(6) because the recipient is located outside India and place of supply is outside India. Obiter - observations on broader policy developments (e.g., GST Council recommendation) are explanatory but not essential to the decision. Conclusion: The consultant's services to foreign educational institutions, with invoicing and receipt of payment in foreign exchange and absence of contractual obligation by students, constitute export of services under Section 2(6) IGST Act for the periods in question. ISSUE-WISE DETAILED ANALYSIS - II. INTERMEDIARY STATUS (SECTION 2(13) IGST ACT) AND PLACE OF SUPPLY (SECTION 13(8)) Legal framework: Section 2(13) defines 'intermediary' as broker/agent/any person who arranges or facilitates supply between two or more persons, excluding a person who supplies services on his own account. Section 13(8)(b) previously treated intermediary services as having place of supply at supplier's location (thus potentially excluding export treatment). Precedent treatment: Coordinated judicial authority has construed 'intermediary' narrowly: mere performance of services for a foreign principal does not automatically convert the service provider into an intermediary; the essential characteristic is arranging or facilitating supply between third parties rather than supplying services on one's own account. Higher courts and tribunals have applied this principle to educational consultancy and similar services, and Supreme Court dismissals of SLPs reinforce that contractual privity and liability for payment determine recipient and status. Interpretation and reasoning: The Court examined the agreements and commercial operation - the consultant performs services (counseling, marketing and facilitating admissions) for the foreign institutions, issues invoices and receives commission/fees from them. Clauses in some agreements labeling the consultant as 'agent' were considered but the Court emphasised substance over form: mere designation as agent in contract does not conclusively make the provider an intermediary under Section 2(13) where the provider renders services on its own account to the foreign institution. The definition's focus is on arranging/facilitating supplies between third parties; where the consultant supplies services to the foreign institution itself, it is not an intermediary. The Department's reliance on Section 13(8) to deem place of supply at supplier's location is negated by the factual conclusion that the services are not intermediary services; additionally, legislative/policy movement (GST Council recommendation to omit clause (b) of Section 13(8)) corroborates that intermediaries should generally have place of supply as location of recipient. Ratio vs. Obiter: Ratio - A person who renders services to a foreign principal, invoices and receives payment from that principal and does not merely arrange or facilitate third-party supplies is not an 'intermediary' under Section 2(13); consequently, such services are not to be treated under Section 13(8)(b) as having place of supply at supplier's location for denying export benefits. Obiter - discussion of the GST Council recommendation and legislative intent provides context but is not essential to the adjudication of the specific contractual facts. Conclusion: The consultant is not an 'intermediary' within Section 2(13) IGST Act; intermediary classification is inapplicable on the facts. Therefore Section 13(8)(b) does not operate to deprive the consultant of export treatment for its services rendered to foreign educational institutions. ISSUE-WISE DETAILED ANALYSIS - III. VALIDITY OF APPELLATE AUTHORITY'S GRANT OF REFUND Legal framework: Refund entitlement follows from export of services under Section 2(6) and compliance with conditions (including receipt of payment in convertible foreign exchange). Administrative orders rejecting refunds must show application of mind and consonance with legal provisions. Precedent treatment: Appellate and judicial decisions have set aside refund rejections where adjudicating authority mischaracterised the nature of services (e.g., treating supplier as intermediary) without adequate analysis of contractual incidence and commercial realities. Interpretation and reasoning: The Adjudicating Authority rejected refund claims on grounds of intermediary status, time-bar, and incorrect refund head. The Appellate Authority examined agreements and circumstances, concluded the relationship is principal-to-principal and the services are marketing/consultancy services qualifying as export, and found the Adjudicating Authority's findings arbitrary and without adequate application of mind. The Court, applying the above legal analysis and consistent precedents, found the Appellate Authority's conclusion legally sustainable and the Adjudicating Authority's rejections unsupportable on the facts and law. Ratio vs. Obiter: Ratio - Where services meet statutory export criteria and the Adjudicating Authority's rejection lacks proper application of legal tests and factual analysis, appellate allowance of refund claims is sustainable. Obiter - remarks on procedural irregularities in the Adjudicating Authority's approach that do not affect the essential legal outcome. Conclusion: The Appellate Authority correctly allowed the refund claims; its orders do not warrant interference. The Department's impugned rejections were arbitrary and the refunds are to be processed with statutory interest in accordance with law. CONSOLIDATED CONCLUSION AND DIRECTIONS 1. Services of the Indian educational consultant to foreign educational institutions, invoiced to and paid by those institutions in convertible foreign exchange, qualify as 'export of services' under Section 2(6) IGST Act. 2. Such consultant does not fall within the definition of 'intermediary' under Section 2(13) IGST Act on the facts; consequently Section 13(8)(b) does not deny export treatment in this case. 3. The Appellate Authority's allowance of refund claims is legally sustainable; the earlier refund rejection orders based on intermediary characterization and procedural infirmities are not tenable and must be set aside. Refunds are to be processed with applicable statutory interest within the stipulated period.