Facts – The petitioner is engaged in the business of providing bookkeeping, payroll, and accounting services to its affiliated entity located in United Kingdom through the use of cloud technology.

The petitioner made an application for refund of unutilized input tax credit in respect of the export of services for the tax periods, April 2018 to December 2019, in the requisite Form RFD 01.

Subsequent to the submission of the refund application, the petitioner received a show cause notice proposing to reject the petitioner’s claim for the refund on the ground that the services rendered by the petitioner to its foreign client fall under the category of “intermediary services” and, therefore, the place of supply for the such services will be considered within the territory of India. Petitioner’s refund application was rejected under RFD-06 by the authorities, upon the submission of the reply against the SCN under RFD-09. 

Issue – Whether the services rendered by the petitioner can be considered as an “intermediary” within the meaning of Section 2(13) of the IGST Act?

Observation – The Hon'ble Court remarked that in the case of intermediary services, there are three entities: one that provides the primary service, one that receives the primary service, and an intermediary that serves as an agent or broker to facilitate or arrange such services for the service receiver. 

In this case, the petitioner is neither enabling the provision of services by a third party nor acting as a middleman in obtaining such services for its affiliate. The petitioner is, in fact, engaged to offer the services and is the primary service provider in the context of the services it provides - bookkeeping, payrolls, and accounts via cloud technology. Therefore, if the recipient of the services is located outside of India, the professional services would come under the definition of export of services as defined in Section 2(6) of the IGST Act.

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Decision - The Hon'ble Delhi High Court decided that, while the agreement contains the word "agent," it is evident that the petitioner is not acting as an agent for the receiver in the purchase of services. It does, in reality, provide the primary function of "Bookkeeping, Payroll, and Accounts via Cloud Technology." The fact that such services may be provided to clients of the petitioner's subsidiary, Boks Business Services Limited, does not qualify the petitioner as an "intermediary."

Furthermore, the Hon'ble Court instructed the authorities to handle the petitioner's refund claim as soon as possible, ideally within eight weeks of the date of the judgment.

Hence, according to the facts of the case, it can be concluded that if the services are provided directly to the receiver, the provider cannot be designated an intermediary under Section 13(8) of the IGST Act, 2017. Furthermore, if the recipient of such services is situated outside of India, the professional services would come under the definition of export of services as defined in Section 2(6) of the IGST Act.

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