Facts of the Case

The Petitioner, an Indian branch office of Ernst & Young Limited (UK), provided professional consultancy and advisory services to overseas group entities such as EY US, EY Australia, EY UK, and EY New Zealand.

  • Services included business advisory, tax compliance, audit assistance, and technical consultancy.
  • Payments were received in convertible foreign exchange.
  • The Petitioner filed refund applications for accumulated Input Tax Credit (ITC) for the period December 2017 to March 2020.

However, the refund claims were rejected by the Adjudicating Authority on the ground that the Petitioner was acting as an “intermediary”, and therefore, the place of supply was India.

This resulted in denial of export benefits under GST. 

Issues Involved

  1. Whether the services rendered by the Petitioner qualify as “intermediary services” under Section 2(13) of the IGST Act, 2017.
  2. Whether such services qualify as “export of services” under Section 2(6) of the IGST Act.
  3. Whether denial of ITC refund on the basis of intermediary classification was valid.

Petitioner’s Arguments

  • The Petitioner directly provided professional services to overseas entities on a principal-to-principal basis.
  • It did not arrange or facilitate services between two parties, hence cannot be classified as an intermediary.
  • Payments were received in foreign exchange, fulfilling export conditions.
  • Under the earlier service tax regime, identical services were held not to be intermediary services.
  • The definition of intermediary under GST is similar to the service tax regime.

Respondent’s Arguments

  • The Petitioner acted on behalf of its foreign head office and group entities.
  • It was facilitating services between EY entities and their clients.
  • Hence, it qualified as an intermediary under Section 2(13) of IGST Act.
  • Accordingly, Section 13(8)(b) applies, making the place of supply India, thereby denying export status.

Court Findings / Order

The Delhi High Court allowed the petition and held:

  • The Petitioner provided services on its own account, not as an intermediary.
  • An intermediary must arrange or facilitate supply between two parties, which was not the case here.
  • There were only two parties involved (Petitioner and overseas client) — not three, which is essential for intermediary classification.
  • Merely providing services “on behalf of” another entity does not make one an intermediary.
  • The authorities misinterpreted Section 2(13) of IGST Act.

Final Order:

  • Impugned orders were set aside.
  • Authorities were directed to process ITC refund claims.

Important Clarifications by Court

  • Intermediary requires 3 parties → Supplier, recipient, and facilitator.
  • Direct service providers are NOT intermediaries.
  • “On behalf of” ≠ intermediary.
  • GST law maintains consistency with service tax regime interpretation.
  • Place of supply defaults to recipient’s location (outside India) when not intermediary.

Sections Involved

  • Section 2(13), IGST Act, 2017 – Definition of Intermediary
  • Section 2(6), IGST Act, 2017 – Export of Services
  • Section 13(2), IGST Act, 2017 – General rule for place of supply
  • Section 13(8)(b), IGST Act, 2017 – Place of supply for intermediary services
  • Rule 89, CGST Rules, 2017 – Refund provisions

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB23032023CW86002022_131355.pdf

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