The Bombay High Court judges split on the constitutional validity of GST Provision for Place of Supply relating to Intermediary services.
The petitioner, Dharmendra M. Jani is a proprietor of a proprietorship firm M/s. Dynatex International has its registered office at Andheri (West), Mumbai which is engaged in providing marketing and promotion services to customers located outside India. It is registered as a supplier under the provisions of the Central Goods and Services Tax Act, 2017.
The export of service by the petitioner as an intermediary would be treated as intra-state supply of services under section 13(8)(b) read with section 8(2) of the IGST Act rendering such transaction liable to payment of central goods and services tax (CGST) and state goods and services tax (SGST).
Mr. Bharat Raichandani contended that section 13(8)(b) read with section 8(2) of the IGST Act would lead to double taxation being denied. In case of intermediary services in relation to import of goods in India, there are two distinctly identifiable supplies involved, viz, supply of goods by the overseas supplier to the Indian importer of goods; and supply of services by the intermediary to the overseas supplier of goods. The two distinct supplies are liable to tax under two different statutes i.e., Customs Act, 1962 and the IGST Act operating under two different fields of taxation.
The division bench of Justice Abhay Ahuja and Justice Ujjal Bhuyan presided over matters pertaining to the constitutional validity of Section 13(8)(b) & Section 8(2) of IGST Act dealing with ‘place of supply (POS) in case of ‘Intermediary service’.
The court said that section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 is ultra vires the said Act besides being unconstitutional.
However, Justice Ujjal Bhuyan opines that Section 13(8)(b) of IGST Act, 2017 “is ultra vires the said Act besides being unconstitutional”.
Justice Ujjal Bhuyan refuses to accept views of Gujarat High Court in Material Recycling Association of India while elucidating that “decision of one High Court is not binding on another High Court though it deserves due consideration and certainly has a high persuasive value”; Justice Bhuyan further holds that “it is evident that section 13(8)(b) of the IGST Act not only falls foul of the overall scheme of the CGST Act and the IGST Act but also offends Articles 245, 246A, 269A and 286(1) (b) of the Constitution.
Justice Abhay Ahuja expresses that he is unable to be persuaded by Justice Bhuyan’s opinion and therefore “would like to record my separate opinion in the matter”.
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