The Bombay High Court, on Tuesday, upheld the levy of IGST on liability on service provided by intermediaries to persons located abroad under section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017.
Justice G. S. Kulkarni was considering a bunch of petitions where the petitioners challenged the constitutional validity of the provisions of Section 13(8)(b) and Section 8(2) stating that the provisions are unconstitutional.
The single bench observed that “the provisions of Section 13(8)(b) and Section 8(2) are confined in their operation to the provisions of IGST Act only and the same cannot be made applicable for levy of tax on services under the CGST Act and MGST Act, on such interpretation, the provisions are intra vires the Constitution, the IGST, the CGST, and the MGST Acts.”
The Court, after analyzing the provisions, observed that the ‘export of services’ has been defined only under the IGST Act under Section 2(6); ‘intermediary’ has been defined for the purposes of IGST Act under Section 2(13). Thereafter, ‘intra-State supply’ has been defined in Section 8 of the IGST Act. Section 12 of the IGST Act defines ‘place of supply of services where the location of supplier and recipient is in India; and finally, Section 13 of the IGST Act is the provision which determines the place of supply of services where the location of the supplier or location of recipient is outside India.
There is another provision that is relevant, namely, Section 16 of the IGST Act providing for “Zero Rated Supply”, which ordains that the export of goods or services or both would amount to a zero-rated supply. A person registered to make a ‘zero-rated supply’ shall be eligible to claim a refund, as provided for in subsection (3).
“Thus, a cumulative reading of these provisions of the IGST Act gives a complete indication of a statutory mechanism as created for the purpose of the IGST Act, namely, insofar as the transaction of export of services by the intermediary is concerned, the same would necessarily fall within the framework of the IGST Act only. It would be too far-fetched to consider that certain provisions of the IGST Act are framed not of any relevance to the IGST Act but to the CGST and the State GST Acts. This would indirectly mean that something which could be expressly legislated to fall under the CGST or the State GST Acts has been legislated under the IGST Act for the purposes of the CGST/MGST Acts. Such intention cannot be attributed to the IGST Act, as the provisions incorporated therein are certainly of relevance and applicability in so far as the inter-State trade and commerce is concerned,” the Court observed.
concluding a 118 pages-judgment, the Court held that “the provisions of Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid and constitutional, provided that the provisions of Section 13(8)(b) and Section 8(2) are confined in their operation to the provisions of IGST Act only and the same cannot be made applicable for levy of tax on services under the CGST and MGST Acts.”
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