The court, however, did not make any observation on what type of tax—central goods and services tax (CGST), state GST (SGST), or integrated GST (IGST)—would be levied on these services offered by intermediaries such as agents, brokers, or middlemen to clients outside India.
These services are currently taxed through provisions under the IGST ACT but SGST and CGST are imposed on them, too. The provision—Section 13(8)(b) —has carved out an exception for these services by not treating them as exports even as these are consumed outside India. Consequently, these services do not enjoy the zero tax liability given to pure export services. This provision means that even if an intermediary provides services outside India, they will be deemed to have been provided in the area where the supplier of services is registered.
A division bench of the court was split on the issue. While one judge said the provisions are constitutionally valid, the other said these are ultra vires. The matter went to the third judge.
As such, it said the Centre cannot impose CGST and states cannot impose SGST on these services. He referred the matter back to the Bombay high court.
However, it did not say which tax would be imposed on these services.
“While the decision of the high court tilts towards constitutionality of the place of provision for intermediary services, there is need for clarification and amendment as to which tax would be applicable on such services when the provider and the recipients are both in the same state,” said Abhishek Rastogi, a lawyer and founder of Rastogi Chambers who argued for the petitioner before the Bombay High Court.
