2022 (1) TMI 952 - HC - GST

Refund of excess tax collected from the petitioner - period from September, 2019 to August, 2020 - HELD THAT - As per the CBIC circular, Supply of services by a subsidiary/sister concern/group concern, etc. of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a company in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act, 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of section 8 of IGST Act, 2017 - the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of section 8 of IGST Act, 2017. Such supplies, therefore, would qualify as export of services , subject to fulfilment of other conditions as provided under sub-section (6) of section 2 of IGST Act . Matter remitted back to respondent No.3 for taking a fresh decision on the claim of refund made by the petitioner, having regard to the above circular dated 20.09.2021 - petition allowed by way of remand.

Summary

Issues:
1. Quashing of order under the Central Goods and Services Tax Act, 2017
2. Refund of excess tax collected
3. Interpretation of the term "export of services"

Analysis:

1. The petitioner sought to quash an order dated 30.07.2021 under the Central Goods and Services Tax Act, 2017, claiming it to be illegal and arbitrary. The issue revolved around the rejection of the petitioner's claim for refund of Input Tax Credit by the 3rd respondent, which was upheld by the 2nd respondent in appeal. The contention was that services provided by the petitioner to its overseas branch were not considered as "Export of Services." The petitioner argued that a circular issued by the Central Board of Indirect Taxes and Customs clarified that holding companies were separate legal entities, making the petitioner eligible for a refund.

2. The petitioner relied on a circular dated 20.09.2021, which highlighted that a company incorporated in India and a foreign company incorporated outside India were recognized as separate legal entities under the CGST Act. Therefore, subsidiaries, sister concerns, or group concerns of a foreign company incorporated in India were considered distinct persons under the law. The circular emphasized that services provided by such entities to establishments of the foreign company outside India would qualify as "export of services." In light of this circular, the respondent's counsel agreed that the matter needed reconsideration by the original authority.

3. Consequently, the High Court set aside the impugned order dated 30.07.2021 and remanded the matter back to respondent No.3 for a fresh decision on the petitioner's refund claim. The court directed the authority to consider the circular dated 20.09.2021 within six weeks and provide a decision after giving the petitioner due notice and hearing. The writ petition was disposed of, and any pending miscellaneous applications were closed without costs.