GSTAT Mumbai Rejects Dow Chemical's ₹13.41 Crore IGST Refund Claim, Holds Procurement Services Are Imports

The Goods and Services Tax Appellate Tribunal, Mumbai, has held that procurement services received by Dow Chemical International Pvt. Ltd. from its Switzerland-based group entity were imports of services and not intermediary services, making them liable to Goods and Services Tax in India.

A division bench of President Justice (Retd.) Dr. Sanjaya Kumar Mishra and Technical Member Anil Kumar Gupta dismissed the company's appeals against the rejection of refund claims exceeding ₹13.41 crore of Integrated Goods and Services Tax (IGST) paid under the reverse charge mechanism.

The tribunal observed, “we are of the opinion that services received by Dow India are in the nature of an import and the place of supply shall be in India, not in Europe. Thus, it will not come within the purview of Section 13(8)(b) of the IGST Act, and definition provided in Section 2 (13) of the IGST Act”

The dispute arose from a procurement agreement executed on July 1, 2021, under which Dow Europe GmbH, Switzerland, provided procurement support to the Indian company. Its role extended beyond identifying suppliers and negotiating commercial terms to reviewing contracts and purchase orders and managing procurement activities for entities within the Dow group.

Between January and June 2022, Dow Chemical treated the arrangement as an import of services and paid IGST under the reverse charge mechanism. It later changed its legal position, contending that Dow Europe merely facilitated procurement between the Indian entity and independent overseas suppliers.

After reversing the corresponding input tax credit, it sought a refund of the tax paid. The refund claims were rejected by the adjudicating authority and that decision was affirmed in appeal.

Before the tribunal, the company argued that Dow Europe satisfied the statutory definition of an intermediary. The tax department maintained that it independently rendered substantive procurement services as the Dow group's centralized procurement hub.

Relying on the Karnataka High Court's ruling in Columbia Sportswear India Sourcing Pvt. Ltd. and the Delhi High Court's ruling in BlackBerry India Pvt. Ltd., the tribunal concluded that Dow Europe supplied services on its own account and not as an intermediary.

It observed, “Services provided by Dow Europe cannot be termed as 'intermediary service' and as it is not in the nature of the ancillary service, rather it is a core service provided by it to one of its sisters concerned, who is operating under the global concern, i.e., 'Dow INC'.”

The tribunal, however, disagreed with the first appellate authority's finding that the refund claim was merely an afterthought, holding that a refund application cannot be rejected solely because a taxpayer later realises tax was paid under a misconception.

It nevertheless dismissed all the appeals after holding that the services remained taxable imports into India.

For Appellant: Advocate Mihir Prashant Deshmukh, 

For Respondent: Shwetal Shepal