This Tax Alert summarizes a recent Bombay High Court (HC) judgment1. The issue relates to constitutional validity of section 13(8)(b) of Integrated Goods and Services Tax Act, 2017 (IGST Act) which provides for place of supply of intermediary service.
The writ petition was heard by divisional bench, of which one judge had given his decision on 9 June 2021, declaring section 13(8)(b) as unconstitutional2. Being unable to share the same opinion as that of the first judge, the second judge has separately pronounced his opinion on 16 June 2021.
The key observations of the second judge are:
- The power to enact provisions determining the nature of supplies as inter-state or intra state and place of supply originates from Articles 246A, 269A and 286 of the Constitution.
- When there is a specific provision defining intermediary and place of supply, the question of applying a general provision would not arise.
- From the plain language of section 13(8)(b), it is clear that section neither seek extra territorial operation nor seek to levy tax on service recipient outside India.
Accordingly, the second judge held that section 13(8)(b) is constitutionally valid.
In view of the difference in opinion of both the judges, Registry will place the matter before the Chief Justice on administrative side for doing the needful.
Comments
- It will be interesting to see the manner in which the matter will get concluded. The Chief Justice may refer the issue to a larger bench.
- While on one hand, the validity of place of supply of intermediary service is under question, on the other hand there is an ambiguity in interpreting the scope of intermediary which is leading to unwarranted disputes between Revenue and taxpayers.
- If the place of supply of intermediary service is struck down, the disputes relating to classification of a service as intermediary service or not will not arise.
[1]. TS-272-HC(BOM)-2021-GST
[2]. Refer our tax alert dated 12 June 2021
