The Delhi High Court upheld the views of the CESTAT that ruled that under Rule 9 of POPS rules, the services provided by the respondent in facilitating in recruitment of students in the foreign universities as their education agent, constitute ‘export of services’ and they are not ‘intermediary services’.
The Court noted that the respondent is engaged in giving guidance to prospective students to seek admissions in universities located outside India, and it does not collect any consideration from prospective students.
Since the respondent is providing service to universities located in foreign countries who are paying consideration to the respondent, the Court clarified that these services are covered by the provision of ‘export of services’.
The Division Bench comprising Justice Prathiba M. Singh and Justice Renu Bhatnagar observed that after the amendment in place of supply provisions for intermediary services under section13(8) of the IGST Act, the ‘intermediary services’ are no longer services for which the place of location of the supplier would be deemed as the place of supply.
The Bench also observed that even for such services the place of the recipient of the services would be place of supply as per Section 13(2) of the IGST Act. Thus, the confusion that was prevalent relating to intermediaries and their entitlement to claim benefits, based on the ‘export of services; is eliminated.
The Bench also took reference from the decision in the case of Ernst & Young Ltd v. Add. Commissioner CGST Appeals-II, Delhi [2023 (73) G.S.T.L. 161 (Del)], where it was held that “A person who provides services, as opposed to arranging or facilitating of goods from another supplier, is not an intermediary within the definition of Section 2(13) of the IGST Act.’
Briefly, the respondent firm, engaged in providing support services in India to foreign universities and institutions, entered into an agreement with foreign universities wherein the respondent facilitates recruitment of students as their education agent and for the said purpose, earns a commission. According to the respondent, the commission earned is not liable to Service tax as the services of the respondents are provided to foreign clients and revenues are earned in foreign exchange.
The Department’s stand is that the service provided by the respondent is taxable as the same would qualify as intermediary service. It was alleged that in terms of Rule 9(c) of the POPS rules the place of provision of intermediary services is the location of the service provider. Considering that the respondent was located in India, the place of provision of Services is in India. Therefore, though, the universities with whom it had agreements are abroad, the same would not constitute export of services.
Resultantly, demand of service tax of Rs. 15.58 crores along with interest under Section 75 of the Finance Act, 1994and penalties under Section 77 and 78(1) of the Finance Act, 1994, was confirmed. On appeal, the CESTAT overturned this demand, and held that under Rule 9 of POPS rules, the services provided by the respondent constitute export of services and they are not intermediary services.
Appearances:
Senior Advocate Shubham Tyagi, for the Appellant/ Revenue
Advocates Gaurav Gupta, Rahul Agarwal and Saurabh Dahiya, for the Respondent/ Taxpayer
