Support Services To Overseas Group Companies Are Exports, Not Intermediary Services: GSTAT New Delhi

The Goods and Services Tax Appellate Tribunal (GSTAT), New Delhi, on 30 October held that support services provided by an Indian entity to its overseas group companies on a principal-to-principal basis qualify as export of services and do not constitute intermediary services under the Integrated Goods and Services Tax (IGST) Act, 2017.

A Division Bench of President Justice Dr. Sanjaya Kumar Mishra and Technical Member Anil Kumar Gupta allowed seven appeals filed by Expedia Online Travel Services India Private Limited, setting aside the rejection of its refund claims aggregating Rs. 55.99 crore for the financial years 2019-20 to 2022-23. It said:

“...we come to the definite conclusion that the services provided by the Appellant i.e. Expedia India do not come within the purview of intermediary services rather it comes within the definition of export services under Section 2(6) of the IGST Act, 2017…”

Expedia India had challenged the rejection of its refund claims for unutilised Input Tax Credit (ITC). The department had rejected the claims on the ground that its business support and software development services constituted intermediary services, with the place of supply being in India.

The company submitted that it provided services through its own personnel under agreements with Expedia Inc., USA, and other overseas group entities. It contended that it rendered services on its own account and had no contractual relationship with the customers of the overseas entities.

The Tribunal rejected the Revenue's objection to the jurisdiction of the Principal Bench, observing that the dispute involved determination of the place of supply, which falls within the exclusive jurisdiction of the Principal Bench under Section 109(5) of the CGST Act, 2017.

On the classification of services, it observed that intermediary services require at least three parties and involve two distinct supplies: a main supply between two principals and an ancillary service of arranging or facilitating that supply.

Further, it held that a service provider operating on a principal-to-principal basis cannot be treated as an intermediary merely because its activities facilitate the business of the overseas recipient. It also noted the absence of any agency relationship or privity of contract between Expedia India and the customers of its overseas group companies.

Relying on its earlier decision in Navitas Eduservices Private Limited and the Delhi High Court's ruling in FATEH Education Consulting (P) Ltd., the it held that Expedia India's services did not fall within the definition of intermediary services under Section 2(13) of the IGST Act and qualified as exports under Section 2(6).

Moreover, the Tribunal held that the vague allegations and absence of findings by the authorities amounted to travelling beyond the scope of the show cause notice and violated the principles of natural justice. It said:

“...we are of the opinion that this is a case of not only travelling beyond the gamut of the SCN but is also of violation of the principles of natural justice and, therefore, impugned orders are not sustainable”.

Accordingly, the GSTAT set aside the impugned orders and directed the department to refund the unutilised ITC along with applicable statutory interest under Section 56 of the CGST Act, 2017.

For Appellant: Chartered Accountants Deepak Suneja and Ramanand Mandal

For Respondent: Assistant Commissioner Devender Kumar Singh, CGST, Gurugram, assisted by Superintendent Dharambir