Karnataka HC Grants IGST Refund to Columbia Sportswear, Clarifies Intermediary vs. Principal-to-Principal Distinction [Read Order]

In a recent ruling, the Karnataka High Court directed the Revenue Department to refund the Integrated Goods and Services Tax (IGST) along with applicable interest to Columbia Sportswear India Sourcing Pvt. Ltd. The refund must be processed within a period of three months. The court quashed prior orders issued by the department that had classified the services exported by the petitioner as “intermediary services” under the GST framework.

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Columbia Sportswear India filed a writ petition challenging the denial of its refund claim. The company had entered into a Buying Support Services Agreement with its US-based parent company to assist in identifying suppliers and coordinating procurement activities in India.

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Although the services were rendered to a foreign entity and payment was received in convertible foreign exchange, the GST authorities denied the refund by treating the petitioner as an intermediary under Section 2(13) of the IGST Act, thereby placing the place of supply in India.

The petitioner's counsel argued that it operated on a principal-to-principal basis and provided services on its own account. They submitted that it did not act on behalf of or bind the foreign recipient in any capacity and that it merely supplied the support services independently. In support of its claim, the petitioner relied on the terms of the agreement and judicial precedents including rulings in Amazon Development Centre India Pvt. Ltd., Genpact India Pvt. Ltd., and BlackBerry India Pvt. Ltd.

The revenue counsel argued that the petitioner’s role fell within the scope of intermediary services and thus the refund was not admissible. They also sought to deny the claim on the grounds of limitation, arguing that the refund application was filed beyond the prescribed period.

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The single-judge bench comprising Justice S.R. Krishna Kumar rejected the Revenue’s arguments and held that the petitioner was not an intermediary as defined under the Act. The court observed that the services were provided independently and without any agency relationship.

The court stated, “The petitioner provides main service on its own account and does not qualify as an ‘intermediary’… the customer support services are provided independently and unconnected to the services provided by the foreign affiliates to their customers on a principal-to-principal basis.”

The court explained the statutory requirement that an intermediary must merely arrange or facilitate a supply between two other parties, forming a triangular relationship. Since Columbia Sportswear India had a direct agreement with the foreign recipient and rendered services independently, this requirement was not met.

On the issue of limitation, the court referred to Notification No. 13/2022-Central Tax and concluded that the claim was not time-barred due to the extension of adjudication timelines in light of the COVID-19 pandemic.

The court ordered the Revenue Department to process the refund claim along with interest and allowed the writ petition. The ruling offers substantial clarity on the distinction between intermediary services and independent export of services under GST law.

To Read the full text of the Order CLICK HERE

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