In one of the most important judgements in GST, the Bombay HC has pronounced its judgement on the deeming fiction created by Section 13(8)(b) of IGST Act. The constitutional validity of section 13(8)(b) of the IGST Act was challenged by the Petitioner contending that the aforesaid provision is violative of Articles 14, 19, 245, 246, 246A, 248, 265, 269A, and 286 of the Constitution.
The matter was first listed before the division bench of the Bombay HC, wherein the One Judge observed that Section 13(8)(b) of IGST Act not only falls foul of overall scheme of CGST Act and IGST Act but also offends Articles 245, 246A, 269A and 286(1)(b) of Constitution, and the other judge has expressed his disagreement and has rendered his separate opinion.
Therefore, in view of such difference in opinion, the matter was listed before the Hon’ble Chief Justice. The Chief Justice of the Bombay HC has held that the fiction which is created by Section 13(8)(b) would be required to be confined only to the provisions of IGST and ruled that Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid, and constitutional. However, the court has also held that these provisions can only be applied to the IGST Act and can’t be used to levy tax on intermediary services under the CGST and SGST Acts.
Dharmendra M. Jani vs. Union of India [Writ Petition No.2031 Of 2018]
GLS Comments:
In a rather lengthy and elaborate decision which includes multiple views from the various courts, this landmark judgment is welcome by the trade with open arms as it will have a far reaching impact on many taxpayers engaged in a similar business of export. In another matter concerning the intermediary service provision, it would be relevant to note that the Delhi HC in RE: M/s Ernst and Young Limited [2023-VIL-190-DEL], held that Professional services provided to foreign entities of the parent company does not amount to 'intermediary services'. This judgment on the scope of intermediary services is likely to provide much-needed certainty and clarifications for taxpayers. It would now be interesting to see whether the Revenue would challenge the instant judgement of the Bombay HC, before the SC.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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