The Supreme Court of India has settled a long-standing dispute concerning the Goods and Services Tax (GST) applicability on services provided by Indian education consultants to foreign universities, ruling in favor of refunds for these consultants. The decision, which dismisses a Special Leave Petition filed by the GST department, marks a significant victory for the overseas education recruitment industry.
The core of the dispute revolved around whether the services provided by Indian education consultants to foreign universities should be classified as "intermediary services" or "export of services" under the Integrated Goods and Services Tax (IGST) Act, 2017. The GST department had contended that these consultants acted as intermediaries between Indian students and foreign universities, thus not qualifying the services as exports. This classification would have made the services subject to GST, with the place of supply being within India.
However, the Supreme Court upheld the Bombay High Court's ruling, affirming that when Indian education consultants have a direct contractual relationship with foreign universities and receive consideration in foreign currency, their services constitute "export of services". This means that the services are exempt from GST and eligible for IGST refunds. The court emphasized that these consultants provide services to foreign universities on a principal-to-principal basis and do not merely arrange or facilitate third-party transactions.
The ruling has far-reaching implications for the overseas education consulting industry in India. It brings much-needed relief to both GST-registered and unregistered partners. Unregistered partners will now receive their full commission earnings without the 18% GST deduction, significantly boosting their profitability. More broadly, the decision provides clarity and legal certainty for the entire sector, fostering a more favorable business environment.
Following the Supreme Court's pronouncement, a critical question arises for taxpayers who had previously paid GST on such services: can refund claims be filed under Section 54 of the CGST Act, 2017, even if the statutory limitation period has expired? This section addresses the circumstances under which GST refunds can be claimed. The court's decision clarifies that GST paid earlier is not legally payable tax and assesses whether Explanation (2)(d) to Section 54 can be invoked when the judgment relied upon is not in the claimant's own case.
Experts suggest that refund applications under Section 54 are maintainable despite limitation objections, and filing the refund within a reasonable period from the Supreme Court judgment strengthens the claim on equitable grounds. It is also noted that litigation may be inevitable if departmental authorities reject claims mechanically based on limitation.
The Supreme Court's decision in the case of The Union of India & Ors V. KC Overseas Education Pvt Ltd not only resolves a significant GST dispute but also reinforces the principle that constitutional substance should take precedence over procedural technicalities. This ruling aligns with previous judgments, such as the Commissioner of Service Tax Vs. Vodafone India Limited case, where the definition of export of service was analyzed in detail.
