Intermediary service test denied where overseas business support was rendered on a principal-to-principal basis.

Business support services rendered to an overseas group entity on a principal-to-principal, cost-plus basis were not intermediary services because the provider did not arrange or facilitate supply between that entity and third parties. Under the Place of Provision of Services Rules, 2012, intermediary status applies only where a person facilitates a main service between two or more persons; mere assistance to the recipient's business on its own account is insufficient. As the place of provision was outside India, the service was not taxable in India and the demand for service tax, interest and penalties was unsustainable.

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Issues: Whether the services rendered by the appellant to its overseas group entity were intermediary services falling under Rule 9 of the Place of Provision of Services Rules, 2012, or business support services governed by Rule 3, and whether service tax, interest and penalties were therefore payable.

Analysis: Service tax under the Finance Act, 1994 was leviable only on services provided in the taxable territory, and the place of provision had to be determined under the Place of Provision of Services Rules, 2012. Intermediary services are confined to a person who arranges or facilitates a main service or supply between two or more persons, whereas a person who renders support services on its own account does not answer that description. The agreement and the flow of consideration showed that the appellant was paid by the overseas entity to support its business operations, on a cost-plus basis, and there was no direct lis or agency relationship between the appellant and the overseas clients of that entity. The appellant did not arrange or facilitate supply between third parties, but only assisted its overseas recipient in its operations.

Conclusion: The services were not intermediary services and Rule 9 did not apply. The place of provision was outside India, no service tax was payable, and the demand of tax, interest and penalties was unsustainable.

Ratio Decidendi: A service provider who merely supports an overseas recipient's business on a principal-to-principal basis, without arranging or facilitating a supply between that recipient and third parties, does not render intermediary services for the purpose of Rule 9 of the Place of Provision of Services Rules, 2012.

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