IT Services to Foreign Parent Are Not Intermediary Services Under GST

The petitioner, M/s. Infodesk India Pvt. Ltd. is a company registered under the CGST Act, 2017, and is a wholly owned subsidiary of Infodesk Inc., USA. It provides software consultancy, IT infrastructure management, editorial support, content creation, and customer support services to its parent company pursuant to a service agreement dated 21.02.2011. The petitioner raised tax invoices on its parent company and claimed refund of accumulated Input Tax Credit on the ground that the services constituted zero-rated supply being export of services under Section 2(6) read with Section 16 of the IGST Act.

The refund claim was rejected by the adjudicating authority on two grounds, first, that the claim was time-barred under Section 54 of the CGST Act, and second, that the services provided were intermediary services under Section 2(13) of the IGST Act and not export of services. The appellate authority upheld the rejection. As the GST Appellate Tribunal was not constituted, the petitioner approached the High Court under Article 226.

Issue Before HC: Whether software consultancy and IT support services provided by an Indian subsidiary to its foreign parent company constitute “intermediary services” under Section 2(13) of the IGST Act, thereby disqualifying them as export of services for GST refund purposes.

HC Held: The Hon’ble High Court allowed the writ petition and quashed the orders passed by the refund authority and the appellate authority. The Court held that the petitioner was providing services to its parent company on a principal-to-principal basis and on its own account, and therefore could not be treated as an intermediary. The Court observed that the service agreement was bipartite, the petitioner bore all costs and risks, earned a cost-plus markup, and was not merely arranging or facilitating services between two parties.

The Court further held that the refund application was filed within the limitation period, as the relevant date was the date of filing on the common portal and not the date of physical submission of documents. The respondents were directed to process the refund claim treating the services as export of services and to complete the exercise within twelve weeks.

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