Goods & Services Tax (GST) in IndiaTaxPrincipal-to-Principal Relationship Recognized in IGST Refund for Exported Sourcing Services

 INTRODUCTION

The Hon’ble High Court of Karnataka (hereinafter referred to as “High Court” in the case of Columbia Sportswear India Sourcing Pvt. Ltd. v. Union of India, Writ Petition Numbers 12116 of 2024 ruled that Columbia Sportswear India was entitled to a refund of Integrated Goods and Services Tax (hereinafter referred to as “IGST”) because its services qualified as exports rather than intermediary services. This decision clarified important concepts under the GST law. Within three months, the Revenue Department was ordered by the High Court to pay back Columbia Sportswear India Sourcing Pvt. Ltd. for the IGST and any associated interest.

FACTS

M/s Columbia Sportswear India Sourcing Pvt. Ltd. (hereinafter referred to as “the Petitioner”) entered into a Buying Support Services Agreement with Columbia Sportswear Company, a company incorporated and operating under the laws of the United States for assisting in sourcing products from India.

The petitioner exported services aiding the foreign company in identifying suitable vendors, coordinating procurement logistics, and providing post-sourcing support.

The Revenue Department denied the refund claims for Input Tax Credit (hereinafter referred to as “ITC”) on the basis that the petitioner was rendering “intermediary services” as defined under Section 2(13) of the IGST Act, 2017, and was therefore ineligible for a refund under the category of “export of services.”

Accordingly, the petitioner approached the High Court through multiple writ petitions challenging the classification and rejection of its refund claims.

ISSUES

1. Does the petitioner meet the requirements of Section 2(13) of the IGST Act, 2017 for an “intermediary”?
2. Whether the services rendered by the petitioner are export of services, and therefore eligible for refund under the CGST and IGST Acts?
3. Whether the refund claims were barred by limitation?

CONTENTION OF THE PARTIES

The Petitioner contended that it acted on a principal-to-principal basis and was not an intermediary or agent.

Further, the Petitioner argued it did not qualify as an “intermediary” under Section 2(13) of the IGST Act by relying on CBIC Circular No. 159/15/2021-GST and judgments in the case of M/s. Amazon Development Centre India Pvt. Ltd., vs. Additional Commissioner of Central Tax & Another,(Writ Petition Numbers 13007 of 2024), Genpact India Ltd., vs. Prl. Commissioner, (SCC OnLine P & H 7161) and Blackberry India Pvt. Ltd vs. Pr. Commissioner, Central Excise & CGST-Delhi South – (2022 VIL-921-CESTAT-DEL-ST).

It argued that there was no three-party arrangement or facilitation of supply between two others – a key requirement under the intermediary definition. Instead, the services were provided on a principal-to-principal basis to its foreign affiliate, on its own account, and not on behalf of any third party. It was explicitly stated in the agreement that the petitioner could neither represent nor obligate the recipient in any way. Since the petitioner acted as an independent service provider and not as an agent or broker, it submitted that the services constituted “export of services” and were therefore eligible for refund of IGST and accumulated input tax credit.

Therefore, under Section 54 of the CGST Act, the Petitioner filed a request for a refund of the accrued Input Tax Credit, claiming that the rendered services met the criteria for “export of services” as outlined in Section 2(6) of the IGST Act.

On the contrary, Union of India (hereinafter referred to as “the Respondent”) claimed that the petitioner was facilitating supplies between foreign principal and Indian vendors, making it an “intermediary”.

Further, the Respondent asserted that such services fall within the scope of Section 13(8)(b) of the IGST Act and therefore does not qualify as exports.

The Respondents also argued that the refund claims were time-barred.

DECISIONS AND FINDINGS

The Hon’ble High Court of Karnataka allowed the writ petitions and held that the petitioner did not fall under the definition of “intermediary”.

The Court observed that the Petitioner acted independently without authority to negotiate or bind the foreign company. The customer support services and sourcing coordination were on its own account, and not merely facilitative in nature and the contractual relationship clearly established a principal-to-principal dynamic.

The Court also clarified that an intermediary is only involved in facilitating or arranging the supply of goods or services between the principal and another party, as defined by Section 2(5) of the CGST Act, as opposed to an “intermediary” under Section 2(13) of the IGST Act.

The Court quashed the impugned orders and show-cause notices issued by tax authorities and directed the refund of IGST and ITC with interest to the petitioner within three months.

The Court further explained that, in view of Notification No. 13/2022 – Central Tax, which extended timescales, the time bar challenge was not valid.

AMLEGALS REMARKS

This judgment provides crucial clarity on distinguishing between intermediary services and exports in cross-border service arrangements. It reinforces the importance of contractual language in establishing independence and absence of agency relationships. It also affirms that providing support or coordination services alone does not amount to intermediary services unless all statutory criteria are clearly met. The ruling serves as a judicial safeguard against expansive interpretations by tax authorities that could adversely impact legitimate service exporters.

– Team AMLEGALS

For any queries or feedback, feel free to reach out to laksha.bhavnani@amlegals.com or hiteashi.desai@amlegals.com