GST Puzzle Solved: Dharmendra M. Jani vs. Union of India Unravels Place of Supply and Intermediary Taxation

Facts of the Case:

Revenue :

• The revenue in this case is represented by the Union of India.
• The revenue defended the constitutionality and validity of Section 13(8)(b) and Section 8(2) of the IGST Act, 2017.

Petitioner :

• The petitioner is a proprietary firm engaged in providing marketing and promotion services to its overseas customers, who are engaged in manufacturing and/or selling goods.
• The petitioner’s services result in direct purchase orders being placed by Indian importers on the petitioner’s foreign customers. The overseas
  customers then supply goods directly to the Indian importers.
• The petitioner receives commission payments from its foreign customers once the Indian importers make payments for the supplied goods. These payments are received in convertible foreign exchange.
• The petitioner asserts that its transactions qualify as “export of services” as per their interpretation, as the services provided by the petitioner are consumed and used by overseas clients outside India. They argue that this qualifies as export and should be exempt from CGST and MGST.
• The petitioner highlights the government’s policy to promote exports and states their intention to challenge the provisions that subject their transactions to GST.
• The petitioner pays the GST on the received commission under protest, indicating their disagreement with the tax liability. They reserve the right to claim a refund for the GST paid.

Judgement:

Provisions of Section 13(8)(b) and Section 8(2) of IGST Act are legal, valid and constitutional and are confined in their operation to provisions of IGST Act only and same cannot be made applicable for levy of tax on services under CGST and MGST Acts.

Summary:

In the case of Dharmendra M. Jani, the High Court of Bombay ruled that the provisions of Section 13(8)(b) and Section 8(2) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) are legally valid and constitutional. The court held that these provisions apply exclusively to the IGST Act and cannot be extended to impose taxes on services under the Central Goods and Services Tax Act (CGST) and the State Goods and Services Tax Act (MGST). The case involved a difference of opinion among judges, with one judge declaring the provisions unconstitutional and another judge upholding their validity. The matter was referred to a third judge, who concluded that the provisions were constitutional. Based on the opinion of the third judge and the concurring judge, the High Court affirmed the legality of the provisions, dismissing the petitions challenging their constitutionality.

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