Subcontracting For A Service Is Not An "Intermediary" Service: Punjab and Haryana High Court orders Refund

The Punjab and Haryana High Court has quashed a demand by the GST Department against Genpact India and held that subcontracting for a service is not an "intermediary" service.The division bench of Justice Tejinder Singh Dhindsa and Justice Deepak Manchanda has noted that Genpact India provides the main service directly to the overseas clients of Genpact International (GI) but does not get any remuneration from such clients. It is GI that gets paid by its customers, to whom the services are being provided directly by the petitioner. Nothing has been brought to light to show that the petitioner has a direct contract with the customers of GI.The petitioner/assessee, Genpact India, is registered with the Haryana GST Authorities and is involved in providing a host of services collectively referred to as BPO services to customers located in India as well as outside India.The petitioner entered into a Master Services Sub-Contracting Agreement (MSA) with GI, an entity located outside India. As per the terms of the MSA, various services are to be provided by the petitioner on a principal-to-principal basis. The petitioner is engaged by GI for the actual performance of BPO services for the clients of GI located outside India. The arrangement requires the petitioner to complete and submit the assigned processes and scope of work directly to third parties located outside India.The petitioner filed an application with the Haryana GST authorities, claiming a refund of unutilized ITC on account of zero-rated supplies of services without payment of IGST under the Letter of Undertaking.The Additional Commissioner CGST (Appeals) has held that the services provided by the petitioner are in the nature of "intermediary services" and do not qualify as "export of services." The Additional Commissioner CGST (Appeals) rejected the refund claim of unutilized Input Tax Credit (ITC) used in making zero-rated supplies of services without payment of Integrated Goods and Service Tax.The petitioner contended that as per the definition of "intermediary" under Section 2 (13) of the IGST Act, a person who provides services "on his own account" is not an "intermediary." The provider of the main service is clearly excluded from the definition of "intermediary." No evidence is on record to establish that the petitioner had not provided the main service. There was no mention of a third party that the petitioner had "arranged" and who had then provided the main services. The petitioner is rendering services "on its own account" and is not facilitating any supply of services between GI and its customers. The petitioner is responsible for providing all services as well as all risks associated with their performance and pricing.The department contended that the petitioner is acting on behalf of GI and supplying support services so that GI can supply main services in the nature of business process outsourcing, information technology services, managing relationships with customers, negotiating customer agreements and statements of work, and customer invoicing and collection to its customers.The court, while allowing the petition, held that the petitioner is providing the services that have been subcontracted to it by GI. It receives fees and charges from the main contractor, GI, for its services as a subcontractor. The main contractor, i.e., GI, in turn, is receiving commissions from its clients for the main services that are rendered by the petitioner pursuant to the arrangement of subcontracting.Case Title: Genpact India Pvt. Ltd. Versus Union of India and othersCitation: CWP-6048-2021 (O&M)Date: 11.11.2022Counsel For Petitioner: Sr. Advocate Tarun Gulati with Advocates Rohit Sud, Sachit Jolly, Disha Jham, Kumar SambhavCounsel For Respondent: Senior Standing Counsel Sharan SethiCitation: 2022 LiveLaw (PH) 296 Click Here To Read Order

Subcontracting For A Service Is Not An "Intermediary" Service: Punjab and Haryana High Court orders Refund

Mariya Paliwala

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