Service by Subsidiary to Parent Not ‘Intermediary Service’: Gujarat HC




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Service by Subsidiary to Parent Not ‘Intermediary Service’: Gujarat HC

 

In the case of Infodesk India Pvt. Ltd. vs. Union of India & Ors. (R/Special Civil Application No. 25609 of 2022), the Gujarat High Court ruled that services provided by a subsidiary to its parent company in an independent capacity do not qualify as ‘intermediary services’ under Section 2(13) of the IGST Act, 2017.

Key Highlights:
Independent Service Provision: Infodesk India, a wholly owned subsidiary, provided IT infrastructure, content creation, and customer support services exclusively for its US-based parent company, charging cost-plus pricing. It was found to operate independently, not as an agent or broker.
Supporting Judgments:
1. Ernst and Young Ltd. vs. Additional Commissioner, CGST Appeals-II, Delhi (Delhi HC): Services provided on one’s own account are not intermediary services.
2. Genpact India Pvt. Ltd. vs. Union of India & Ors. (Punjab & Haryana HC): The intermediary definition under GST follows the erstwhile service tax regime, excluding services provided independently.

Takeaway:

The terms of the agreement and the nature of services must be thoroughly analyzed to determine if a service qualifies as ‘intermediary.’ Circular No. 159/14/2021 offers further clarity on this matter.

This ruling underscores that subsidiaries providing services independently to their parent companies may claim export benefits without falling under the intermediary category.

 The copy of the order is as under:

R SPECIAL CIVIL APPLICATION NO. 25609 of 2022




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