Assessee Providing Support Services to Overseas Parent Not an Intermediary for IGST Refund

Assessee Providing Support Services to Overseas Parent Not an Intermediary for IGST Refund

Issue: Whether an Indian subsidiary, providing support services to its foreign parent company (which deals with foreign universities and students) for facilitating Indian students’ enrollment in foreign courses, qualifies as an “intermediary” under the Integrated Goods and Services Tax Act, 2017, thereby disentitling it to a refund of IGST paid on export of services.

Facts:

• For the period March 2019 to March 2021, the assessee, an Indian subsidiary, was obliged to provide support services to its parent company, IDP Australia.
• These support services were related to Indian students who intended to enroll in courses offered by foreign universities.
• IDP Australia shared a certain percentage of the fees it received from foreign students with the assessee.
• The assessee had no direct contractual obligation with the foreign universities or the students.
• The assessee also did not raise any invoices or receive any consideration directly from the universities or the students.
• The Revenue (tax authorities) rejected the assessee’s refund claim for IGST paid on its supply of services to IDP Australia, arguing that the assessee squarely fell within the definition of an “intermediary.”

Decision: The court held that the assessee was not an intermediary and was, therefore, entitled to the refund of IGST. The matter was remanded for further proceedings consistent with this finding. The decision was in favor of the assessee.

Key Takeaways:

• Intermediary Definition (Section 2(13) of IGST Act): An “intermediary” generally means a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons. The key characteristic is facilitating a main supply between other parties.
• Direct Service Provider vs. Facilitator: The ruling distinguishes between a direct service provider (the assessee providing support services to its parent) and an intermediary (one who facilitates a supply between two other distinct parties). Here, the assessee’s services were rendered to IDP Australia, not between IDP Australia and the universities/students directly.
• Lack of Contractual Nexus: The absence of a direct contractual relationship or consideration flow between the assessee and the ultimate parties (universities or students) was a crucial factor. The assessee was effectively providing back-office or support services to its parent.
• Reliance on Own Precedent: The court specifically noted that in identical facts and circumstances in the assessee’s own case, the CESTAT (Customs, Excise and Service Tax Appellate Tribunal) had already given a categorical finding that the assessee was not an intermediary. This emphasizes the importance of consistency in tax rulings for the same assessee under similar facts.
• Export of Service Implications: If the assessee is not an intermediary, its services to IDP Australia (located outside India) can qualify as an “export of service” under the GST law, making it eligible for IGST refund (zero-rated supply).
• Remand for Consequential Action: Once it’s determined that the assessee is not an intermediary, the matter is remanded to the tax authorities to process the refund claim accordingly, as the initial rejection was based on a flawed interpretation of “intermediary.”