Software Development Services to Overseas Entity Qualify as Export of Services, Not Intermediary Services

Issue:

Whether software development services provided by a petitioner-assessee to its overseas entity, under a master service agreement explicitly stating an independent service provider relationship and no agency, constitute “export of services” (not liable for GST) or “intermediary services” (liable for GST, thus denying refund of IGST).

Facts:

For the period April 2018 to November 2019, the petitioner-assessee, a company providing software development services, entered into a master service agreement with its overseas entity, which was the recipient of the services. The assessee contended that these services amounted to “export of services,” making them not liable to pay service tax/GST on the supply. Initially, the petitioner was granted a refund of IGST on the export of service. However, the Appellate Authority, allowing the revenue’s appeal, subsequently rejected the refund claim, presumably on the grounds that the services were “intermediary services.”

Decision:

The court ruled in favor of the assessee. It cited an identical situation in Columbia Sportswear India Sourcing (P.) Ltd. v. Union of India (Karnataka), where it was held that:

The definition of ‘intermediary’ under Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (IGST Act), focuses on the function of “arranging or facilitating supply of goods or services or both or of securities” between two or more persons, and the intermediary should not make this supply on their own account.
In the Columbia Sportswear case, there were only two persons in the agreements; the assessee rendered services on its own account to a service receiver located outside India and did not enable supply between the foreign recipient and third parties. The acts were those of an independent contractor, not representing or binding the foreign client.
The foreign recipient remunerated the assessee by way of a service fee on a cost-plus-markup basis (not percentage of success, common in agency agreements), and the foreign recipient was free to choose from whom it would procure, with the assessee’s recommendations not being final or binding.

Applying this reasoning to the instant case, the court noted that Paragraph 10 of the Master Agreement explicitly clarified that the performance by the Service Provider (petitioner) would be that of an “independent service provider.” It explicitly stated that nothing in the agreement would “create or imply an agency relationship” or “joint venture or partnership,” and the Service Provider would have “no authority (and would not hold itself out as having authority) to bind the US recipient” or “make any agreements or representations on behalf of overseas entity without its prior written consent.”

A perusal of the Master Agreement clearly indicated that the petitioner was not an ‘intermediary’ as wrongly held by the Appellate Authority. As such, the impugned order of the Appellate Authority deserved to be set aside, and the Order-in-Original granting the refund in favor of the petitioner deserved to be upheld.

Key Takeaways:

Independent Service Provider vs. Intermediary: The crucial distinction lies in whether the service provider acts “on their own account” to deliver a service to the recipient or merely “arranges or facilitates” a supply between the recipient and third parties.
Definition of ‘Intermediary’ (Section 2(13) IGST Act): The definition requires the intermediary to facilitate a supply between two or more persons where the intermediary is not the principal supplier.
Contractual Terms are Key: The specific terms of the Master Service Agreement are paramount. Explicit clauses disclaiming agency, partnership, and authority to bind the overseas entity are strong evidence that the service provider acts as an independent contractor.
Nature of Remuneration: Payment based on a service fee, cost-plus-markup, rather than a commission or success-based fee, further supports the independent contractor relationship.
Export of Service (Section 2(6) IGST Act): When services are rendered by an independent service provider from India to a recipient located outside India, and the payment is received in convertible foreign exchange, it generally qualifies as an “export of service” and is zero-rated, meaning no GST is payable.
Binding Precedent: The reliance on the Columbia Sportswear case reinforces the judicial interpretation of “intermediary services” in the context of IT/software services provided to overseas entities.
Favor of Assessee: The decision is a significant win for the assessee, allowing them to claim the refund of IGST on their software development services, confirming their classification as export of services.
Relevant Circulars: The decision implicitly aligns with Circular No. 193/05/2023-GST dated July 17, 2023 (and earlier Circular No.183/15/2022-GST dated December 27, 2022), which sought to clarify the distinction between intermediary services and pure export of services, emphasizing that a principal-to-principal supply is an export.

HIGH COURT OF KARNATAKA

Athene Technologies India LLP

State of Karnataka

S.R. Krishna Kumar, J.

WRIT PETITION NO. 23286 OF 2023 (T-RES)

APRIL 28, 2025

Raghunath M.D. , Adv. for the Petitioner. Aravind V. Chavan, Adv. and Smt. Jyoti M. Maradi, HCGP for the Respondent.

ORDER

1. In this petition, petitioner seeks for the following reliefs:-

“a) Allow the Writ Petition on costs.

(b) Issue a writ or Certiorari by quashing the order passed by the Respondent No.2 at Annexure-F OIA No.188-190/2023-24/ADC-AII/GST dated 01.09.2023 passed by the 2^nd Respondent.

(c) Any other relief/s as deemed fit to be granted to the Petitioner by this Hon’ble Court in the circumstances of the case, in the interest of justice and equity.”

2. The brief facts giving rise to the present petitions are as under:-

The petitioner is a Limited Liability Partnership firm, which is registered with the service tax / GST Department and is providing software development services. The petitioner which was earlier known as ‘SWC INDIA INVESTCO LLP’ entered into Master Service Agreement vide Annexure-H dated 01.04.2019 with ‘THE ATHENE GROUP LLC, a limited liability company having its office in USA and it is an overseas entity and recipient of the services supplied by the petitioner which amounts to export of services, on account of which, the petitioner was not liable to pay service tax / GST on the said supply of services.

2.1 The petitioner filed a refund claim of IGST for April, 2022 and May, 2022 in a sum of Rs.76,16,997/- under Section 54 of the CGST Act, which was allowed by the 3^rd respondent vide Order-in-Original dated 28.07.2022 passed in favour of the petitioner. Aggrieved by the said Order-in-Original, the Revenue filed an appeal before the appellate authority which proceeded to pass the impugned order dated 01.09.2023 allowing the appeal and thereby, rejecting the refund claim of the petitioner, who is before this Court by way of the present petition.

3. Heard learned counsel appearing for the petitioner and learned counsel appearing for the respondents-Revenue and perused the material on record.

4. Before adverting to the rival contentions, it would be necessary to extract the aforesaid Agreement at Annexure-H dated 01.04.2019 entered into between the petitioner and The Athene Group LLC, the overseas recipient of the services supplied by the petitioner as hereunder:-

“MASTER SERVICES AGREEMENT

This master service agreement (“Agreement”) is made on April 1, 2019 (“Execution Date”) between:

1. THE ATHENE GROUP LLC, a limited liability company formed under the laws of the State of Virginia, U.S.A., and having its principal office at 580 Herndon Parkway, Suite 500, Herndon VA 20170, U.S.A. (hereinafter referred to as “Athene”, which expression shall, unless repugnant to the context or meaning thereof, include its successors and permitted assigns; and

2. SWC INDIA INVESTCO LLP, a limited liability partnership incorporated in India and having its registered office at No. 565/B, 7th Main Road, HAL 2nd Stage, Indiranagar, Bengaluru, Karnataka 560038, India and principal office at No. 13, 1^s Floor, “CRN Chambers” Kasturba Road Bangalore 560 001 (hereinafter referred to as “Service Provider”, which expression shall, unless repugnant to the context or meaning thereof, include its successors and permitted assigns).

Athene and Service Provider are collectively referred to as the “Parties” and individually as a “Party”.

WHEREAS, Athene is engaged in the business of providing technology services in the CRM (Customer Relationship Management) and salesforce ecosystem and currently sells a product called Skience to customers in the wealth management industry.

WHEREAS, Service Provider and its employees are capable of performing information technology, software development and consulting services as required by Athene.

WHEREAS, in connection with the performance of Athene’s obligations to its clients (“Clients”), Athene desires to utilize Service Provider and its employees, and Service Provider desires to provide its technical services to Athene as set forth herein.

NOW, THEREFORE, Athene and Service Provider agree as follows:

1. Scope of Services

1.1. Service Provider hereby agrees to perform the Services described in Exhibit A (“Statement of Work” or “SOW”) in accordance with the completion times set forth therein and in accordance with the Agreement. Service Provider agrees and undertakes that Athene shall have right to extend or provide the Services to its Clients, customers, including Athene’s affiliates, or any other entity it may deem appropriate.

1.2. It is the intent of the Parties that the Agreement shall function as the master agreement under which individual SOWs shall be mutually agreed and executed between the Parties in writing.

1.3. Each SOW shall be considered integral part of the Agreement. However, in the event of any conflict between the terms of the Agreement and a SOW, the relevant SOW shall prevail over this Agreement.

2. Payment Terms

2.1. In consideration of the provisioning of the Services by Service Provider under each SOW, Athene shall pay an amount equal to (a) Service Provider’s total cost, that is, cost and expenses relating to the provisioning of the applicable services under such SOW, including, without limitation, salaries of employees, compensation to third party providers, office rent and expenses, travel costs and administrative expenses, depreciation and amortization which are attributable to the Services under such SOW (collectively “Actual Costs”) PLUS (b) a mark-up which shall be equal to such percentage of the Actual Costs which shall be mutually agreed between the Parties based on the provisions of section 92C of the Income Tax Act, 1961. An payments made under the Agreement shall be in US Dollars.

The Parties hereby agree that the invoices for each calendar month will be raised by Service Provider within the 7 day of succeeding calendar month (“Invoice Date”) and the duly approved invoice by Athene’s customer manager, subject to clause 2.2, will be payable by Athene within thirty (30) days after the date of receipt of such invoice by Athene (“Billing Due Date”).

2.2. In case of any disagreement on the invoices, Athene shall give a notice of such disagreement to Service Provider within fifteen (15) days of the Invoice Date specifying the disputed portion of such invoice and reasons for the dispute. Athene shall pay the undisputed amount on or before the Billing Due Date. Any disputed amount shall be payable to Service Provider subject to resolution of dispute in favour of Service Provider within fifteen (15) days after the date of such resolution.

2.3. In respect of disputed amounts, the operating team of the Parties shall endeavor to reconcile the differences and resolve the dispute within 7 (seven) days from the date of the notice. In the event the operating teams are unable to resolve the dispute within 7 (seven) days from the date of the notice, the dispute shall be escalated to the business heads of the Parties who shall endeavor to resolve the dispute within 21 (twenty-one) days from the date of the notice. Subject to aforesaid resolution of dispute in favour of Athene, if the disputed amount has already been paid then, Athene shall have right to deduct the disputed amount from any invoices delivered to it. In the event the dispute is resolved in favour of Service Provider and if Athene has not made the payment for the disputed amount, then Athene shall make payment within fifteen (15) days after the date of such resolution.

2.4. Parties hereby agree that any Goods and Services Tax liability arising in India and any other indirect taxes, duties and charges of any kind imposed by any federal, state or local governmental entity on amounts received in consideration of the provision of services (“Taxes”) that is levied hereunder shall be to the account of Athene provided, that, each Party shall bear its own income taxes that are based on its own net income.

2.5. Applicable Taxes at the prevailing rate at the time of invoice will be shown as a separate line item on the face of invoice. Invoices delivered by Service Provider shall be in accordance with the applicable provisions of Indian Goods and Services Tax statutes.

2.6. Where Athene is required by law to deduct withholding Tax or Tax deducted at source (“WHT”) from a payment to Service Provider, Athene will pay such WHT to the applicable tax authority, remit the balance amount after the deduction of the WHT to Service Provider and forward to Service Provider on a timely manner an official WHT certificate.

3. Term and Termination

3.1 The Parties agree that this Agreement and the rights and obligations of the Parties under this Agreement shall become effective from the date horeof (“Effective Date”) and shall be valid until the expiry of the date that is 10 (ten) years from the Effective Date (“Initial Term”) and in the event the Agreement is not terminated prior to expiry of the Initial Term, the term of the Agreement shall be automatically renewed for another term of 10 (ten) years and so on until the agreement is terminated in accordance with clause herein below pursuant to this Agreement (“Term”).

3.2 In the context of the SOW, each SOW (or part thereof) shall remain effective from the date of such SOW for the tenure mentioned in the SOW, unless

3.2.1 Specifically mutually agreed to be terminated by the Parties to such SOW in writing, or

3.2.2 This Agreement is terminated pursuant to clauses 3.3 or 3.4 below.

3.3 Termination Rights of Athene Athene shall have a right to terminate this Agreement in the following situations:

3.3.1 by providing thirty (30) days prior written notice to Service Provider and without assigning any reason;

3.3.2 immediately by providing prior written notice to Service Provider for any breach of the terms of this Agreement;

3.3.3 immediately by providing prior written notice to Service Provider in the event of any fraud, gross negligence or willful default by Service Provider under the Agreement; or

3.3.4 immediately by providing written notice to Service Provider in the event Service Provider passes a resolution for voluntary winding up or a resolution for involuntary winding up of Service Provider is passed and which may have a material adverse effect, or any petition for winding up of Service Provider has not been set aside within 180 (one hundred eighty) days from the date of first hearing of such petition; or Service Provider is ordered to be wound up by court, The Parties agree that termination/expiry of the Agreement will automatically terminate all SOWs under the Agreement; however, termination of individual SOW shall mean to terminate only that SOW. It is hereby agreed between the Parties that termination for breach will not preclude Athene from exercising any other remedies for breach.

3.4 Termination by Service Provider

3.4.1 Service Provider shall have a right to terminate this Agreement by providing sixty (60) days prior written notice to Athene in the event Athene does not pay an invoice on the applicable due date and Athene fails to make such payment within sixty (60) days of receiving notice of such breach;

3.4.2 Service Provider shall terminate this Agreement by providing a prior written notice of thirty (30) days in the event a resolution for winding up of Athene is passed, or any petition for winding up of Athene is admitted by a court of competent jurisdiction or a provisional liquidator or receiver is appointed and such order has not been set aside within 180 days from the admission of such steps/proceedings or Athene is ordered to be wound up by court.

3.5 The provisions relating to payment terms (Clause 2), intellectual property ownership (Clause 4), confidential information (Clause 5), non-compete (Clause 7), limitation of liability and indemnification (Clause 9) and arbitration and governing law (Clause 13) shall survive termination or expiration of this Agreement.

4. Intellectual Property Ownership

4.1 Service Provider acknowledges and agrees that all work or materials developed or provided by Service Provider for or on behalf of Athene under this Agreement, or in connection therewith (collectively, the “Works”), are exclusively owned by Athene.

4.2 Service Provider further acknowledges and agrees that, to the fullest extent allowed by law, all of the Works are “works made for hire”, as that phrase is defined in the Copyright Revision Act of 1976 (17 U.S.C. § 101). Athene shall therefore be deemed to be the sole author and owner of any and all right, title, and interest therein, including, but not limited to, intellectual property rights, in perpetuity and throughout the world in any and all media whether now or hereafter known (including, but not limited to, any and all registrations, applications, renewals, extensions, restorations, reversions and all other proprietary and intellectual property rights related to the Works), as well as the right to collect all royalties and income generated therefrom and the right to sue, counterclaim and recover for all past, present and future violations thereof.

4.3 To the extent that any such Works are not owned by Athene or do not qualify for any reason as “works made for hire”, and to the extent that Service Provider may have or acquire any right, title, or interest in such Works, Service Provider hereby irrevocably assigns to Athene any and all right, title and interest in and to the Works (including but not limited to the copyright therein), and any and all ideas and information embodied therein.

4.4 Service Provider agrees to execute and deliver such assignments, copyright applications, patents, patent applications, licenses, and other documents and instruments as Athene may direct and to cooperate fully with Athene, both during and after the Term, to enable Athene to secure and maintain in any and all countries the rights described and granted in Clauses 4.1, 4.2 and 4.3 with respect to Works and to perfect, confirm, defend, police and enforce Athene’s rights therein. In the event Service Provider fails to timely execute and/or deliver any such document or instrument, Service Provider hereby irrevocably constitutes and appoints Athene and any officer, employee or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority to take all appropriate action and to execute any and all such documents and instruments necessary to effectuate the foregoing.

5. Confidential Information

5.1 All information relating to Athene, clients or affiliates of Athene that is known to be confidential or proprietary, or which is clearly marked as such, will be held in confidence by Service Provider and will not be disclosed or used by Service Provider except to the extent that such disclosure or use is reasonably necessary to the performance of Services of Service Provider.

5.2 These obligations of confidentiality will extend for a period of twelve (12) months after the termination of this Agreement, but will not apply with respect to information (i) that is independently developed by a Party without reference to any confidential or proprietary information of the other Party, (ii) that was or becomes generally available to the public other than as a result of action or inaction by a Party, (iii) that was within a Party’s possession prior to such information being furnished by the other Party (provided that the source of such information was not known to be bound by an obligation of confidentiality with respect to such information) or (iv) which becomes available to a Party on a non-confidential basis from a source other than the other Party or its representatives, provided that such source is not known to the Party receiving such information, after reasonably inquiry, to be bound by an obligation of confidentiality with respect to such information.

6. Duties and Obligations of Service Provider

6.1 Service Provider agrees to cooperate with Athene’s reasonable requests with respect to the scheduling and performance of the Services, and will keep accurate records of its activities undertaken in performance of the Services. Service Provider shall provide such records to Athene in such form and timeframe as agreed between the Parties, and will also provide Athene with such other reports that Athene may reasonably require from time to time. Service Provider shall comply with all applicable laws, including but not limited to those related to intellectual property rights and shall not violate the intellectual property rights of other Party, antibribery laws and labour laws and taxation laws, affecting its assets, its business and operations, employees, services and agreements.

6.2 As the employer of its own employees performing the Services, Service Provider will maintain all necessary personnel and payroll records for its employees, calculate wages, withhold or pay applicable federal, state and local taxes or other amounts required to be paid or withheld by law, and pay net wages and fringe benefits, if any, directly to its employees. Service Provider shall assume full responsibility for the payment of all applicable withholdings, including, without limitation, social security, unemployment compensation and all other local, state, and federal taxes or other charges for its employees who are working hereunder. Service Provider shall obtain necessary work permit, visa, residency documents required by the appropriate authority of the relevant country/jurisdiction in relation to the Services and for its personnel and keep the same valid during the subsistence of the Agreement.

6.3 Service Provider shall comply with the terms and conditions specified in this Agreement and the relevant SOW and also ensure compliance of the terms by its personnel.

6.4 Service Provider shall take appropriate precautions not to breach the privacy of Athene, its customers, Clients or affiliates or any relevant third party during the course of performance of the Services and comply with the data privacy laws.

7. Non-Compete

Service Provider agrees that during the period of engagement and for a period of twenty-four (24) months thereafter, Service Provider will not, directly or indirectly, and in any capacity whatsoever, perform or compete or solicit the performance of services which are similar to or competitive with services of the type performed or offered by Athene to any person including to (i) any Clients or (ii) any current client prospect of Athene for whom Service Provider directly or indirectly assisted in the preparation or submission of a proposal made by Athene to such client prospect during the one (1) year period preceding Service Provider cessation of work.

8. Service Provider Warranties

Service Provider warrants that it has the knowledge, experience and skill to perform the Services, and that it will perform the Services according to the specifications described in this Agreement and SOW in a professional and workmanlike manner. Service Provider warrants that the performance of its Services will not result in the infringement of any patent, copyright, trade secret, or other proprietary right of any third person.

9. Limitation of Liability and Indemnification

Neither Party will be liable to the other for special, indirect or consequential damages incurred or suffered by the other arising as a result of or related to Services, whether in contract, tort, or otherwise, even if the other has been advised of the possibility of such loss or damages.

Service Provider shall indemnify and hold harmless Athene and its employees, directors and officers against any claims, loses, costs, damages, expenses, attorney fees incurred by Athene arising out of or in conjunction with Service Provider’s breach of this Agreement, gross negligence or willful misconduct or inaccurate misrepresentation and warranties.

10. Relation of Parties

The performance by Service Provider of its duties and obligations under this Agreement will be that of an independent service provider, and nothing in this Agreement will create or imply an agency relationship between Service Provider and Athene, nor will this Agreement be deemed to constitute a joint venture or partnership between the Parties. Service Provider has no authority (and shall not hold itself out as having authority) to bind Athene and Service Provider shall not make any agreements or representations on Athene’s behalf without Athens’s prior written consent.

11. Secondment of Employees

Athene shall have the right, but not the obligation, to second and appoint a representative to the Service Provider, and to remove any such appointed representative, in its sole discretion. Athene shall also have a right to request the Service Provider to second and appoint its employee to Athene and Service Provider shall be obliged to second its employee to Athene. Any such secondment shall be on such terms, including as to cost to be charged to the other Party, to be agreed between the Parties in writing

12. Non-assignment

Neither Party will assign this Agreement, in whole or in part, without the prior written consent of the other Party; provided, that without the written consent of Service Provider, Athene may assign its rights and obligations under this Agreement to any of its affiliates. Any attempt to assign in violation of this Clause 12 is void in each instance. This Agreement will inure to the benefit of, and be binding upon the Parties hereto, together with their respective legal representatives, successors, and assigns, as permitted herein.

13. Arbitration and Governing Law

Any dispute arising under this Agreement will be subject to binding arbitration by a single Arbitrator with the American Arbitration Association (AAA), in accordance with its relevant industry rules, if any. The Parties agree that this Agreement will be governed by and construed and interpreted in accordance with the laws of the State of Delaware. The arbitration will be held in Delaware. The Arbitrator will have the authority to grant injunctive relief and specific performance to enforce the terms of this Agreement. Judgment on any award rendered by the Arbitrator may be enforced in any Court of competent jurisdiction. Each of the Parties hereby expressly and irrevocably submits to the exclusive jurisdiction of the State of Delaware. Each of the Parties hereby expressly and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such dispute brought before any such arbitrator that any such dispute has been brought in an inconvenient forum.

14. Attorneys’ Fees

If any litigation or arbitration is necessary to enforce the terms of this Agreement, the prevailing Party will be entitled to reasonable attorneys’ fees and costs.

15. Severability

If any term of this Agreement is found to be unenforceable or contrary to law, it will be modified to the least extent necessary to make it enforceable, and the remaining portions of this Agreement will remain in full force and effect.

16. Force Majeure

Neither Party will be held responsible for any delay or failure in performance of any part of this Agreement to the extent that such delay is caused by events or circumstances beyond the delayed Party’s reasonable control.

17. No Waiver

The waiver by any Party of any breach of covenant will not be construed to be a waiver of any succeeding breach or any other covenant. All waivers must be in writing and signed by the Party waiving its rights. This Agreement may be modified only by a written instrument executed by authorized representatives of the Parties hereto.

18. Entire Agreement

This Agreement together with any attachment referred to herein including SOW constitute the entire agreement between the Parties with respect to its subject matter, and supersedes all prior agreements, proposal, negotiations, representations or communications relating to the subject matter. Both Parties acknowledge that they have not been induced to enter into this Agreement by any representations or promises not specifically stated herein.

19. Provision of Services by Athene to Service Provider

19.1 Athene shall also render certain services which may include information services and other services as may be requested and required by Service Provider to perform Services. Service Provider shall be liable to remunerate Athene for such services at actual cost which is allocated and charged to Service Provider on a per user basis.

19.2 Athene shall furnish to Service Provider a monthly report of the basis upon which such common costs are allocated to Service Provider. Actual payment by Service Provider under this report may be adjustable (at the discretion of the parties) against the payment receivable by Service Provider from Athene under this Agreement.

19.3 Notwithstanding sub-clause 2.4 hereinabove, Parties hereby agree that any Goods and Services Tax liability arising in India and any other indirect taxes, duties and charges of any kind imposed by any federal, state or local governmental entity on payment made under sub-clause 19.1 shall be to the account of Service Provider.

IN WITNESS WEHREOF, the Parties have executed this Agreement by their duly authorized representatives.”

5. A perusal of the material on record will indicate that under identical circumstances in the case of Columbia Sportswear India Sourcing (P.) ltd. v. Union of India (Karnataka)/W.P. No. 12116/2024 & connected matters Dated 26.04.2025, this Court came to the conclusion that the petitioner was not an ‘intermediary’ under Section 2(13) of the IGST Act and provisions of the Finance Act, 1994 and the services provided by the petitioner to its overseas service recipients / entities are that of an independent service provider which qualify as export of services under the service tax provisions and 2(6) of the IGST Act and allowed and disposed of the petitions as hereunder:-

11. A conspectus of the above discussion would indicate that the legal position regarding what would constitute intermediary services vis-a-vis a principal to principal relationship can be summarised as under:

•

In terms of Section 2(13) of the IGST Act, 2017, the definition of what is an intermediary would show that it would mean a broker or agent or any other person and the name by what he is called is not important or relevant; what is important/relevant is the function he provides and that would be arranging or facilitating the supply of goods or services or both or of securities; such facilitation or arrangement should be between two or more persons; further, he should not make this supply on his own account;

•

In terms of the above, it is clear that if a person acts as an intermediary, apart from him, at least two persons should be involved and the intermediary would facilitate supply between two or more of them. Therefore, there should be (i) a minimum of three parties (ii) two distinct supplies, where principal will supply the goods or services to a third party as one supply and such a transaction should be facilitated or arranged by one party who is then called an intermediary rendering the second supply to the principal (iii) such a transaction would therefore, mean that one person actually represents the principal as an agent and therefore (iv) does not do his service on his own account.

•

The agreement, therefore, should clearly indicate that he is acting as such facilitator between two or more persons and therefore, at least three parties would then be involved as pointed out by the Apex Court in Bharati Cellular’s case supra stating that it should be a triangular relationship, though the third party need not be identified in the agreement itself but it would be apparent from the agreement that there is a triangular relationship being established in such agreement.

•

Four essential features stand out in an agency relationship which are set out by the Apex Court as under :

(a)

The essential characteristic of an agent is the legal power vested with the agent to alter his principal’s legal relationship with a third party and the principal’s co-relative liability to have his relations altered;

(b)

As the agent acts on behalf of the principal, one of the prime elements of the relationship is the exercise of a degree of control by the principal over the conduct of the activities of the agent. This degree of control is less than the control exercised by the master on the servant, and is different from the rights and obligations in case of principal to principal and independent contractor relationship;

(c)

The task entrusted by the principal to the agent should result in a fiduciary relationship. The fiduciary relationship is the manifestation of consent by one person to another to act on his or her behalf and subject to his or her control, and the reciprocal consent by the other to do so;

(d)

As the business done by the agent is on the principal’s account, the agent is liable to render accounts thereof to the principal. An agent is entitled to remuneration from the principal for the work he performs for the principal.

•

Absence of these ingredients would show that the relationship was not really one of agency but of an independent service provider. This is clear from the circular set out for data hosting services where it is clear that when a person does data hosting services for a foreign company and the foreign company uses this to store third party data, the person providing such services is doing it without any contact with the third party and therefore, cannot be called an intermediary as he does not facilitate or arrange. He is only doing the said services on his own account to the foreign company who could store any data on that platform.

•

Therefore, even if there are three parties, one should clearly see whether the agreement casts an obligation on the service provider to act on someone else’s behalf in respect of such supply and only then it would be an intermediary services. For example, where one party to a contract with another party, sub contracts a portion of his work to a third party, it does not mean that an intermediary relationship is established. Sub contractors would very well be doing the said work on their own account as is often the case with software development or research work carried out in India on contract basis.

•

It is also axiomatic that absence of three persons would straightaway rule out the agreement from the scope of intermediary services as the agreement would then be a service provider-service receiver relationship without the service provider doing any facilitating or arranging. Therefore, in a given agreement, if there is no scope for the service provider to act on behalf of the service receiver, then the agreement is one on principal to principal basis where services are provided on own account.

•

It would be necessary to consider that the definition of “intermediary” is far more restricted than that of an “agent”. The term “agent” is not defined in the IGST Act, 2017 but it is defined in the CGST Act, 2017 under Section 2(5) to mean, a person who carries on the business of supply or receipt of goods or services or both on behalf of another person and he could be a factor, broker, commission agent, arhatia, del credere agent, auctioneer or any other mercantile agent by whatever name called. Therefore, the fine distinction that is there between these two is that while the agent supplies or receives goods or services on behalf of another person, the intermediary only arranges or facilitates supply on behalf of another person without himself supplying the same. This distinction also has to be kept in mind as the definition of intermediary calls him an agent who only does facilitation or arrangement and therefore, while he is an agent and acts for another, his job is to only facilitate or arrange supplies between his principal and a third party.

•

The position in service tax remains identical as set out in the decisions extracted in Amazon’s case supra.

12. In the light of the principles that emerge from the aforesaid Judgments, Circulars, Notifications etc., in the facts and circumstances obtaining in the instant cases as set out supra analyzing the said agreements, I am of the considered opinion that the petitioner is not an ‘intermediary’ under Section 2(13) of the IGST Act and provisions of the Finance Act, 1994 and the services provided by the petitioner to its service recipients are that of an independent service provider which qualify as export of services under the service tax provisions and 2(6) of the IGST Act and consequently, the impugned orders and demand of the respondents deserve to be quashed by issuing further directions in this regard for the following reasons:

(i)

There are only two persons in the subject agreements;

(ii)

The petitioner renders services on its own account to the service receiver located outside India and it does not enable supply between the foreign recipient and the third parties;

(iii)

The acts of the petitioner are that of an independent contractor and it does not represent or bind the foreign client in the course of executing its services.

(iv)

The foreign recipient, therefore, remunerates the petitioner by way of a service fee for the services rendered which is on a cost plus mark up basis and not based on percentage of success, etc. which is common in agency agreements.

(v)

The foreign recipient is free to chose from whom he would procure and the petitioner’s recommendations are not final and binding on it and the petitioner cannot also represent that it is doing something on behalf of the foreign recipient.

(vi)

The host of services rendered by the petitioner is more akin to business support services to enable efficient procurement of garments and a continuing business relationship rather than enabling procurement of orders on a commission basis.

13. In view of the aforesaid facts and circumstances, I am of the view that the impugned orders and demands made by the respondents deserve to be quashed.

XXXXXXXXXXXXXXXXXXX

17. In the result, I pass the following:-

ORDER IN W.P.No. 12116/2024

(i)

W.P.No.12116/2024 is hereby partly allowed.

(ii)

The impugned Order-in-Original No.34/2022-23 dated 01.07.2022 vide Annexure-A and impugned Order-in-Original No.104/2022-23 dated 28.03.2023 vide Annexure-B passed by the 3^rd respondent insofar as they relate to rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ are hereby quashed by holding that the services provided by the petitioner do not fall under the definition of ‘intermediary services’ and that the same is considered as export of services.

(iii)

The impugned orders insofar as they relate to rejection of the refund claim of the petitioner on the ground that they are barred by limitation under Section 54 of the CGST Act are hereby set aside by holding that the refund claims of the petitioner are not barred by limitation in the light of the CBIC Notification bearing No.13/2022-Central Tax dated 05.07.2022 which is applicable to the refund claim of the petitioner;

(iv)

The respondents are directed to grant/pay refund in favour of the petitioner together with interest under Section 56 of the CGST Act, 2017 as expeditiously as possible and at any rate within a period of three months from the date of receipt of a copy of this order.

(v)

All other contentions and issues including rejection of all other refund claims of the petitioner are kept open to be adjudicated by the appropriate authorities bearing in mind the Circular No.183/15/2022-GST dated 27.12.2022 and Circular No.193/05/2023-GST dated 17.07.2023 and in accordance with law.

ORDER IN W.P.No.3420/2023

(i)

W.P.No.3420/2024 is hereby partly allowed.

(ii)

The impugned Order-in-Appeal dated 12.08.2022 vide Annexure-A passed by the respondents insofar as they relate to rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ are hereby quashed by holding that the services provided by the petitioner do not fall under the definition of ‘intermediary services’ and that the same is considered as export of services.

(iii)

(iv)

(v)

ORDER IN W.P.No.3376/2023

(i)

W.P.No.3376/2024 is hereby partly allowed.

(ii)

The impugned Order-in-Appeal dated 04.11.2022 vide Annexure-A passed by the respondents insofar as they relate to rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ are hereby quashed by holding that the services provided by the petitioner do not fall under the definition of ‘intermediary services’ and that the same is considered as export of services.

(iii)

(iv)

(v)

ORDER IN W.P.No.3486/2020

(i)

W.P.No.3486/2020 is hereby partly allowed.

(ii)

The impugned Order-in-Original dated 25.11.2019 vide Annexure-B passed by the respondents and all further demands, notices, orders, proceedings etc., pursuant thereto are hereby quashed.

6. In the instant case, a perusal of the aforesaid Agreement will clearly indicate that at clause No.10 that the petitioner is not an ‘intermediary’ as wrongly held in the impugned order by the appellate authority and as such, the impugned order deserves to be set aside and the Order-in-Original granting refund in favour of the petitioner deserves to be upheld in the present petition. Under these circumstances, it is clear that the aforesaid judgment of this Court in Amazon’s case supra and the principles laid down therein are directly and squarely applicable to the subject Agreement in the present petition, which accordingly deserves to be allowed by quashing the impugned order at Annexure-F dated 01.09.2023 passed by the appellate authority and restoring the Order-in-Original at Annexure-D dated 28.07.2022 for April, 2022 and May, 2022 and issue further directions in this regard.

7. In the result, I pass the following:-

ORDER

(i)

Petition is hereby allowed.

(ii)

The impugned order at Annexure-F dated 01.09.2023 insofar as it relates to allowing the appeal in GST A.310/2022-23 passed by the appellate authority for April, 2022 and May, 2022 is hereby set aside.

(iii)

The order bearing No.04/2022-23 (R) ND-2 dated 28.07.2022 passed by the Deputy / Assistant Commissioner of Central Tax, North Division-2, Bangalore GST North, Commissionerate, is hereby restored and upheld in favour of the petitioner who is entitled to the refund as directed in the said order.

(iv)