2026 (3) TMI 243 - HC - GST

Export of Services: services contracted to a foreign recipient qualify as export and are not subject to service tax.

Business auxiliary services provided to an overseas group entity where the overseas entity is the contractual recipient and payer qualify as export of ... Export of services - Business Auxiliary Services rendered by the assessee to an overseas group entity qualify as export of services under the Export of Services Rules, 2005 - taxable under Section 65(19) sub-clause (iv) of the Finance Act, 1994 - location of service receiver governs export status - wholly owned subsidiary of Carrier Corporation, USA, which in turn is a subsidiary of United Technologies Corporation and is engaged in manufacturing, selling and distribution of various types of Air conditioning and refrigeration equipment. Business Auxiliary Services as export of service - location of service receiver governs export status - HELD THAT: - The High Court examined the facts that the assessee forwarded Indian customer enquiries to an overseas group entity, which contracted directly with the Indian customers and invoiced and supplied the goods, while the assessee received commission in convertible foreign exchange. The Tribunal had held that the actual recipient of the services was the overseas entity and that Rule 3(1)(iii) of the Export of Services Rules, 2005 looks to the location of the service receiver rather than the place of performance. The Court took note that the issue is authoritatively decided by the Supreme Court in Commissioner of Service Tax-III v. Vodafone India Limited [2025 (8) TMI 938 - SUPREME COURT], which affirmed that the location of the service receiver is the relevant factor for export status and rejected the Revenue's contention that services performed in India with ultimate Indian beneficiaries are taxable. Applying that precedent to the present facts, the Court concluded that the assessee's activities fall within the Export of Service Rules and are not exigible to service tax as Business Auxiliary Services. [Paras 6, 8, 11] The services rendered by the assessee to Carrier China qualify as export of service and are not taxable as Business Auxiliary Services; the appeal is dismissed. Final Conclusion: The High Court, applying the Supreme Court's ruling in Vodafone India Limited, held that the assessee's Business Auxiliary Services were export of services (receiver located outside India) and dismissed the Revenue's appeal challenging the Tribunal's order. Issues: Whether business auxiliary services rendered by the assessee to an overseas group entity qualify as export of services under the Export of Services Rules, 2005 and therefore are not taxable under Section 65(19) sub-clause (iv) of the Finance Act, 1994.Analysis: The services comprised facilitation/commission for overseas suppliers who contracted directly with Indian customers, with consideration received in convertible foreign exchange. Rule 3(1)(iii) of the Export of Services Rules, 2005 and Circular No. 111/5/2009 recognise the location of the service receiver as the relevant criterion for export of services. The question was authoritatively addressed by the Supreme Court in Commissioner of Service Tax-III v. Vodafone India Limited (2025), which affirmed that where the receiver of the service is located outside India, the activity falls within export of services and is not taxable even if the eventual use or performance has connection with India; the decision in A.T.E. Enterprises was similarly treated as covered by the Supreme Court's disposal. Applying these principles to the facts where the overseas group entity was the contractual recipient and payer, the services meet the export of services criteria under the Export of Services Rules, 2005.Conclusion: The issue is decided in favour of the respondent (assessee): the business auxiliary services rendered to the overseas entity qualify as export of services and are not exigible to service tax under Section 65(19) sub-clause (iv) of the Finance Act, 1994.Ratio Decidendi: Where the receiver of services is located outside India, the activity qualifies as export of services under Rule 3(1)(iii) of the Export of Services Rules, 2005, and such services are not taxable under Section 65(19) sub-clause (iv) of the Finance Act, 1994.