Refund of Accumulated ITC Allowed; R&D Service Provider Not an 'Intermediary'

Refund of Accumulated ITC Allowed; R&D Service Provider Not an ‘Intermediary’

Issue

Whether a company providing Research & Development (R&D) and business support services to its foreign parent company qualifies as an “intermediary,” and consequently, whether it is entitled to a refund of accumulated Input Tax Credit (ITC) for the export of services under a Letter of Undertaking (LUT).

Facts

Nature of Business: The assessee provided R&D and business support services to its parent company located in Sweden.
Mode of Supply: The services were treated as “Export of Services” and supplied without payment of IGST under a Letter of Undertaking (LUT).
The Dispute: The assessee filed an application for the refund of accumulated/unutilized ITC (since they had no output tax liability to offset it against).
Rejection: The Department (and the Appellate Authority) rejected the refund claim. Although the prompt doesn’t explicitly state the Department’s reasoning, the holding implies the rejection was based on classifying the assessee as an “intermediary.”
- Note: If classified as an intermediary, the “place of supply” becomes the location of the service provider (India), making it a domestic supply, not an export, thus disqualifying it from export refunds.

Decision

Not an Intermediary: The High Court held that the assessee was not an ‘intermediary’.¹ They were providing the services on their own account (R&D), not merely arranging or facilitating a supply between the parent company and a third party.
Entitlement: Since the activity constitutes a valid “Export of Service,” the assessee is entitled to the refund of unutilized ITC under Section 54 of the CGST Act.
Verdict: The rejection orders were quashed. The Department was directed to process and grant the refund along with applicable interest within a stipulated timeframe. [In favour of assessee]

Key Takeaways

The “Intermediary” Trap: Revenue authorities often try to classify IT/ITES/R&D back-offices as “intermediaries” to deny export status. An intermediary is someone who arranges/facilitates supply between two others. If you provide the main service yourself (even to a parent company), you are an exporter, not an intermediary.
Refunds under LUT: Exporters operating under LUT (Zero-Rated Supply without tax payment) can claim a cash refund of the ITC paid on their inputs and input services.
Interest on Delay: If a refund is wrongfully withheld, the taxpayer is entitled to statutory interest (usually 6%) from the date it was due.

HIGH COURT OF KARNATAKA

Bluefish Pharmaceuticals (P.) Ltd.

Union of India^*

S.R.Krishna Kumar, J.

WRIT PETITION NO. 19351 OF 2024 (T-RES)

DECEMBER 11, 2025

Bharat Raichandani, Raaghul Piraanesh and Chandrakiran. K, Advs. for the Petitioner. Nishan Unni.P, CGC and Smt. Jyothi. M. Maradi, HCGP for the Respondent.

ORDER

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

” (a) Issue a writ of certiorari, or a writ or order or direction in the nature of writ of certiorari and set aside the Impugned Order passed under Section 107(11) of the CGST Act vide Order No.ZD2904240547833 dated: 22.04.2024, issued by the 4^th Respondent enclosed as Annexure-B as bad in law.

(b) Issue a writ of certiorari, or a writ or order or direction in the nature of writ of certiorari and to hold that the Refund Rejection Order in Form GST RFD-06 vide No.ACCT-LGSTO-38/RFD-06/2023-24 dated: 24.05.2023, enclosed as Annexure-G issued by 3^rd Respondent was passed without the authority of law and without jurisdiction.

(c) Issue a writ of mandamus, or a writ or order or direction in the nature of writ of mandamus by ordering the Respondent No.3 to refund the accumulated/unutilized ITC available in the electronic credit ledger along with interest.

(d) Issue any other direction or grant any other relief, as deemed fit in the facts and circumstances of this case, in the interest of justice.

(e) Issue a direction to provide for the cost of this petition.”

2. Heard learned counsel for the petitioner and learned CGC as well as learned HCGP for the respondents and perused the material on record.

3. The material on record will indicate that the petitioner is engaged in the business of providing Research and Development services and other business support services to its Parent company namely Bluefish Pharmaceuticals AB, Sweden. During the period April, 2022 to September, 2022, the petitioner having provided export of services, Export Invoices were issued with an endorsement “Export of Services without payment of IGST” under the Letter of Undertaking (LUT). It is the grievance of the petitioner that though the petitioner is not an ‘intermediary’, was entitled to refund of accumulated / unutilized input tax credit (ITC) available in their Electronic credit ledger on account of the export of services without payment of IGST, the refund application filed by the petitioner was rejected by the respondents by passing the impugned order, against which, the petitioner filed appeal, which is also dismissed by the respondents. Aggrieved by the impugned orders passed by the respondents rejecting refund application / claim of the petitioner and confirmed by the appellate authority, petitioner is before this Court by way of the present petition.

4. The respondents have filed their statement of objections contesting / opposing the petition and seeking dismissal of the same. It is contended that the 3^rd respondent has verified the facts and circumstances of the case and noticed that the petitioner has wrongly claimed local supply of services as export of services and hence, the claim of the petitioner was rejected.

5. A perusal of the material on record will indicate that the petitioner is not an ‘intermediary’ and that the petitioner would be entitled to refund as sought for by him in the light of the following judgments:-

(i)

Amazon Development Centre India (P.) Ltd. v. Additional Commissioner of Central Tax,GST Appeals-II Bangalore (Karnataka)/2025 (5) TM1 150 – Karnataka;

(ii)

Columbia Sportswear India Sourcing (P.) Ltd. v. Union of India (Karnataka)/2025 (5) TMI 2139 – Karnataka;

(iii)

Athene Technologies India LLP v. State of Karnataka GSTL 210 (Karnataka)/2025 (6) TMI 88 – Karnataka and

(iv)

Nokia Solutions and Networks India (P.) Ltd. v. Principal Commissioner of Central Tax (Karnataka)/2025-VIL-515-KAR.

6. In view of the aforesaid facts and circumstances and the judgments of this Court in the aforesaid cases as stated supra, I am of the considered opinion that the impugned orders deserve to be quashed and the respondents be directed to grant refund in favour of the petitioner together with applicable interest within a stipulated time frame.

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

ORDER

(i)

Petition is hereby allowed.

(ii)

The impugned order at Annexure-B dated 22.04.2024 passed by the 4^th respondent and the impugned rejection order at Annexure-G dated 24.05.2023 passed by the 3^rd respondent are hereby set aside.

(iii)

The concerned respondents are hereby directed to grant / sanction refund of the accumulated / unutilized ITC available in the electronic credit ledger together with applicable interest in favour of the petitioner within a period of three months from the date of receipt of a copy of this order.