Bombay HC passes final order upholding constitutional validity of PoS provisions for intermediary services under GST

This Tax Alert summarizes the final judgment ^[1] of the Division Bench of the Bombay High Court (HC) on the issue of constitutional validity of Section 13(8)(b) and Section 8(2) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).

As per the said provisions, the place of supply of intermediary services provided to overseas recipient is the location of supplier. Accordingly, export benefits were denied to such suppliers.

Initially, writ petitions were heard by the Division Bench, wherein the first judge struck down Section 13(8)(b) as ultra vires the IGST Act and the Constitution. However, the second judge took a dissenting view and upheld the validity of the said provision. Accordingly, the matter was referred to the third judge.

The third judge held that the provisions of Section 13(8)(b) and Section 8(2) of the IGST Act are constitutionally valid, provided that the said provisions are confined in their operation only to IGST Act^[2]. Consequently, the matter was again placed before the Division Bench for pronouncement of the final judgment.

While disposing the matter, the division bench considered the views taken by the second and the third judge and held the provisions of Section 13(8)(b) and Section 8(2) of the IGST Act, to be legal, valid and constitutional. Accordingly, the writ petitions filed by the assessees were dismissed without any costs. 

Comments

• The present judgement is in line with the earlier ruling of the Gujarat HC which had also upheld the constitutional validity of Section 13(8)(b) and considered the intermediary services provided to overseas customers as taxable in India [2020-TIOL-1274-HC-AHM-GST].
  
• There is no mention in the final judgment about confining the validity of provisions only to IGST Act, as held by the third judge while upholding its constitutional validity. This is likely to remove ambiguity created regarding treatment of intermediary service as inter-state or intra-state transaction and its taxability. 

[1] TS-228-HC(BOM)-2023-GST
[2] Refer our alert “Bombay HC third judge upholds constitutional validity of place of supply provision for intermediary services confining only to IGST” dated 26 April 2023