INTERMEDIARY SERVICES OR EXPORT OF SERVICES?: AN EXPLORATION OFVERIZON AND GENPACT JUDGMENTS IN THE LIGHT OF CONSTITUTION (ONE HUNDRED AND FIRST AMENDMENT) ACT, 2016

Abstract

The litigation revolving around the interpretation of intermediary services vis-à-vis the export of services began during the erstwhile indirect taxation regime. The interpretation adopted by the Revenue resulted in exporting of taxes which in turn, defied the Constitutional spirit. The issue was thereafter settled by the Hon’ble Delhi High Court in the case of Verizon Communication India Pvt. Ltd. vs. Assistant Commissioner, Service Tax in favour of taxpayers. It was held that the recipient of service was determined on basis of the fact that who made the payment for the service. With the introduction of goods and services tax regime in India, the issue was brought into litigation again on the premise that the scope of intermediary services is different under the two tax regimes. The Adjudicating and Appellate Authorities decided the issue against the taxpayers and raised the demand of taxes. The matter travelled upto the Hon’ble Punjab & Haryana High Court in the case of Genpact India Pvt. Ltd. vs. Union of India wherein, it was held that sub-contracting was excluded from the scope of intermediary services and that the scope of intermediary services under the goods and services tax regime is the same as was under the erstwhile service tax regime. Thus, the issue has been settled by the Hon’ble Court in the favour of the taxpayers.