Bombay HC holds International inbound roaming and long-distance telecom services billed to foreign operators qualify as export of services

 

This Tax Alert summarizes recent ruling[1] of the Bombay High Court (HC) on zero-rating of International Inbound Roaming (IIR) and International Long Distance (ILD) services provided by Indian telecom operator to foreign telecom operators (FTO)s. Assessee is a telecom services provider inter alia rendering IIR and ILD services to FTOs which are consumed by FTO’s overseas customers visiting India. Consequently, considering the same as export, assessee claimed refund of integrated tax (IGST) paid on such services as place of supply was outside India as per Section 13(2) of Integrated Goods and Services Tax Act, 2017 (IGST Act). Revenue rejected the refund application on the ground that the place of supply of such services was in India as per Section 13(3)(b) since the same were consumed by customers of FTOs in India. Therefore, such supply cannot be considered as export of services. HC observed that as per Section 2(93) of the Central Goods and Services Tax Act, 2017 (CGST Act), "recipient" means, where the consideration is payable for supply, the person who is liable to pay the consideration. Accordingly, the recipients in the present case are FTOs and not subscribers of FTOs. Further, it agreed with the concept that “customer's customer cannot be your customer” as held by various Tribunals under service tax regime. HC held that the said services were supplied by assessee to FTOs and not to an individual and hence, provisions of Section 13(3)(b) are not applicable. Accordingly, HC concluded that the place of supply of service is outside India (location of FTO) as per Section 13(2) and thus qualifies as export of service. Comments Ruling gains importance in case of inter-state transactions between two parties, particularly involving import or export, which is entered for the benefit of third party. It is pertinent to note that the Supreme Court in its recent judgement held that even though the Indian importer was not a party to the ocean freight contract, he is the recipient of service since he is benefiting from the service contract between foreign exporter and shipping lines. [1] 2022-VIL-486-BOM We hope you find this update useful and should you wish to refer our earlier alerts, please visit our alerts hub by clicking here. Best regards, EY Tax Update Team