The Karnataka High Court has directed the goods and service tax (GST) refund held that the entity providing support services to foreign clients is not an ‘intermediary’.
The bench of Justice S.R.Krishna Kumar has observed 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 orders and demand of the department deserve to be quashed by issuing further directions for the various reasons.
Firstly, there are only two persons in the subject agreements.
Secondly, 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.
Thirdly, 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.
Fourthly, 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.
Fifthly, the foreign recipient is free to choose 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.
Lastly, 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.
The petitioner in all the four petitions is M/s.Columbia Sportswear India Sourcing Private Limited, a company incorporated under the Companies Act. The petitioner is engaged in export of services to their clients outside India and have been filing service tax / GST returns for the same. The petitioner has entered into “Buying Support Services Agreements” with Columbia Sportswear Company, a corporation organized and existing under laws of the United States of America, which is the service recipient for the services supplied by the petitioner – company. Since the petitioner in all the four petitions is one and the same and common questions of law arise for consideration in all the four petitions, they are taken up together and disposed of by the common order.
The petitioner contended that it is not an ‘intermediary’ within the meaning of Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) and that the Customers Support Services provided by the petitioner qualify as export of services under Section 2(6) of the IGST Act and that consequently, the petitioner would be entitled to refund of ITC together with interest under Sections 54 and 56 of the CGST Act, 2017 and the demand made by the respondents deserves to be quashed under the erstwhile service tax provisions where the provisions are but the precursor to the GST regime and worded substantially the same.
The court quashed the rejection of the refund claim of the petitioner pertaining to the issue of ‘intermediary / intermediary services’ 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.
The court directed the department 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.
Case Details
Case Title: M/S Columbia Sportswear India Sourcing Pvt. Ltd. Versus UOI
Case No.: Writ Petition No. 12116 Of 2024 (T-Res)
Date: 26/04/2025
Counsel For Petitioner: V. Raghuraman, Senior Counsel
Counsel For Respondent: Madanan Pillai
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