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2020 (8) TMI 11 - HC - GSTPlace of supply - intermediary services - Export of Services - Constitutional validity of Section 13(8)(b) of the Integrated Goods Service Tax Act, 2017 - refund of IGST paid on services provided by the members of the petitioner association and to their clients located outside India - place of provision of services - location of the supplier or location of the recipient? - inter-state supply - Section 13(8)(b) of the IGST Act, 2017 - Circular No.90/09/2019GST dated 18th January 2019. Whether the provisions of Section 13(8)(b) r.w.s. 2(13) and 8(1) of the IGST Act,2017 are ultra vires and unconstitutional or not? HELD THAT:- The introduction of Goods and Service Tax in India in the year 2017 is with an object of providing one tax for one nation so as to harmonize the indirect tax structure in the country. For the said purpose, the Constitution is amended by the Constitution (One Hundred First Amendment) Act, 2016 to bring on to introduce Article 246A which provides for special provision with respect to Goods and Service Tax. Article 246A begins with non-obstante clause stipulating that notwithstanding anything contained in Articles 246 and 254, the parliament subject to Clause-2, Legislature of every State, have power to make laws with respect to Goods and Service Tax imposed by the Union or by such State - The basic underlying change brought in by the GST regime is to shift the base of levy of tax from point of sale to the point of supply of goods or service. In that view of the matter, Section 13(8)(b) of the IGST Act,2017 which is framed by the parliament inconsonance with the Article 246(2) of the Constitution of India is required to be considered. Conjoint reading of Section 2(6) and 2(13), which defines export of service and intermediary service respectively, then the person who is intermediary cannot be considered as exporter of services because he is only a broker who arranges and facilitate the supply of goods or services or both. In such circumstances, the respondent no.3 have issued Circular No.20/2019 where exemption is granted in IGST rates from payment of IGST in respect of services provided by intermediary in case the goods are supplied in India. The basic logic or inception of section 13(8)(b) of the IGST Act,2017 considering the place of supply in case of intermediary to be the location of supply of service is in order to levy CGST and SGST and such intermediary service therefore, would be out of the purview of IGST. There is no distinction between the intermediary services provided by a person in India or outside India. Only because, the invoices are raised on the person outside India with regard to the commission and foreign exchange is received in India, it would not qualify to be export of services, more particularly when the legislature has thought it fit to consider the place of supply of services as place of person who provides such service in India - there is no deeming provision as tried to be canvassed by the petitioner, but there is stipulation by the Act legislated by the parliament to consider the location of the service provider of intermediary to be place of supply. Similar situation was also existing in service tax regime w.e.f. 1st October 2014 and as such same situation is continued in GST regime also. Therefore, this being a consistent stand of the respondents to tax the service provided by intermediary in India, the same cannot be treated as “export of services” under the IGST Act,2017 and therefore, rightly included in Section 13(8) (b) of the IGST Act to consider the location of supplier of service as place of supply so as to attract CGST and SGST. The contention of the petitioner that it would amount to double taxation is also not tenable in eyes of law because the services provided by the petitioner as intermediary would not be taxable in the hands of the recipient of such service, but on the contrary a commission paid by the recipient of service outside India would be entitled to get deduction of such payment of commission by way of expenses and therefore, it would not be a case of double taxation - the contentions raised on behalf of the petitioner are not tenable in view of the Notification No.20/2019 issued by the Government of India, Ministry of Finance whereby Entry no.12AA is inserted to provide Nil rate of tax granting exemption from payment of IGST for service provided by an intermediary when location of both supplier and recipient of goods is outside the taxable territory i.e. India. Therefore, the respondents have thought it fit to consider granting exemption to the intermediary services viz. service provider when the movement of goods is outside India. It cannot be said that the provision of Section 13(8)(b) r.w. Section 2(13) of the IGST Act,2017 are ultra vires or unconstitutional in any manner - petition disposed off.
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