In a significant ruling, the Gujarat High Court addressed the classification of IT support services provided by Infodesk India Pvt. Ltd., an Indian subsidiary, to its US-based parent company, InfoDesk Inc. The services, which included software development and editorial support, were executed under a service agreement, with the Indian subsidiary invoicing on a cost-plus 8% markup basis. The dispute arose when the tax department rejected the subsidiary's refund claims by labeling the services as intermediary rather than export of services, also citing time-barred claims.
The core issue revolved around whether the services constituted an export under Section 2(6) of the IGST Act or intermediary services under Section 2(13), impacting the eligibility for refund of zero-rated supplies. The Court concluded that the subsidiary was not an intermediary, as it provided services directly to the parent company without facilitating arrangements between parties. The cost structure and independent service delivery aligned with the characteristics of export services.
Further, the Court referenced CBIC Circular No. 159/15/2021 and prior legal precedents, which supported the view that cost-plus models are indicative of principal-to-principal transactions rather than intermediary activities. Additionally, the Court found the rejection of the refund on the grounds of limitation to be unjustifiable, as the claims were filed timely, considering the procedural aspects. Consequently, the High Court set aside the refund rejection, affirming the services as exports and granting relief to the petitioner.
Parties: Infodesk India Pvt. Ltd. v. Union of India & Ors.
Order Date: 27 November 2025
Facts –
- The petitioner, an Indian subsidiary of InfoDesk Inc. (USA), provided software development, editorial and IT-support services to its foreign parent under a detailed service agreement.
- Services were performed on its own account through employees in India, and the petitioner raised monthly invoices on a cost-plus 8% markup basis.
- Refund claims were filed treating the supplies as export of services, but the department rejected them by classifying the petitioner as an intermediary and stating the claims were time-barred.
- The appellate authority upheld the rejection, prompting the petitioner to challenge the orders before the High Court.
Issue –
- Whether the services supplied by the Indian subsidiary to its foreign parent constitute export of services under Section 2(6) of the IGST Act or intermediary services under Section 2(13), thereby affecting eligibility for refund of zero-rated supplies?
Order –
- The Court held that the petitioner performed the primary services on its own account and was not arranging or facilitating services between two parties; hence it cannot be treated as an intermediary.
- The agreement showed that the petitioner bore operational costs, delivered the services independently and charged a markup, which fits the legal test for export of services.
- The Court relied on CBIC Circular No. 159/15/2021 and prior judicial precedents confirming that cost-plus models typically represent principal-to-principal supplies, not intermediary activity.
- The rejection of refund on limitation was held unsustainable because the petitioner had filed the claim within time when considering the portal filing and procedural requirements.
