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October 12, 2023



In this legal drama, we’re diving into a dispute over the legality of a tax law, specifically Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). What makes this case extra interesting is that two judges had opposing views on the matter, leading to a high-stakes legal battle that reached the Chief Justice’s desk.

Setting the Scene:

Our main character here is the petitioner, a marketing and promotion firm working with clients overseas. These international clients make and sell goods, and our petitioner’s job is to help them sell in India. The twist is that this firm only works with foreign clients and gets paid in foreign money. They have no direct role in the deals between Indian buyers and foreign sellers. They earn a commission for connecting Indian customers with international sellers.

The Tax Dilemma:

Now, the real puzzle emerges. The petitioner, a registered supplier under the CGST Act, is caught up in a tax problem. They’re paying Central and Maharashtra GST even though they believe their services are essentially “exported.” They’re grappling with a question: Is it fair to tax services that seem to have no connection to India?

The Battle of Arguments:

On one side, the petitioner argues that the Parliament doesn’t have the power to tax what they see as “exported services.” They say GST is all about taxing where services are consumed. If services are used abroad, they shouldn’t be taxed in India.

On the other side, the tax department argues that GST is meant to eventually reach the end consumer. They say the middleman, in this case, shouldn’t be exempt from taxes.

Constitutional Clash:

The petitioner raises constitutional issues, saying this tax is not only arbitrary but also violates their rights under the Indian Constitution’s Article 14 (equality before the law) and Article 19(1)(g) (right to trade and business).

The Courtroom Showdown:

 As the legal battle unfolds, the judges mention various past cases that show some legal principles are settled and not up for debate. However, the plot thickens when the judge makes a key decision.

The Verdict: In the end, the judge makes a game-changing statement: Section 13(8)(b) and Section 8(2) of the IGST Act are legal and constitutional, with one important condition. These rules only apply to the IGST Act and can’t be used to tax services under the CGST and MGST Acts.

What’s Next:

But the story isn’t over yet. The case now goes to a division bench, and we’re left wondering how they’ll tackle this complex issue, considering the Chief Justice’s remarks.

In this legal showdown, the clash over taxing exported services could have significant implications. Stay tuned to see how this story unfolds.

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