29.07.2022: Customer’s Customer Can Not Be Your Customer”- Service Provided to Subscriber Of Foreign Telecom Operator Is Export of Service- Refund Allowed: Bombay High Court

The Hon’ble High Court of Bombay vide its order dated 04.07.2022 in the matter of Vodafone Idea Limited Vs. The Union of India through Secretary and Others in Writ Petition No. 3221 of 2021 with Writ Petition (L) No. 12860 of 2022, held that telecom services provided to the individual subscribers of Foreign Telecom Operator (FTO) by the petitioner in India would amount to export of services and not considered as a domestic supply.  Therefore, refund of the IGST paid on the provision of said telecom services would be allowed.

That Vodafone Idea Limited filed the writ petition No. 3221 of 2021 seeking directions to the respondent authorities to immediately implement the Order-in-appeal dated 18.08.2021 passed by the Joint Commissioner (Appeals – II), whereby refund of Rs. 1,02,74,14,843/- was granted to the petitioner.  And the revenue has filed the writ petition (L) no. 12860 of 2022 praying for quashing the said order dated 18.08.2021, whereby two appeals Nos. 257 of 2021 for the period May 2019 to June 2019 with respect to the refund amount of Rs. 50,30,92,587/- & Appeal No. 258 of 2021 for the period July 2019 to September 2019 for refund of Rs. 52,43,22,256/- were disposed of.


  • That Vodafone Idea limited filed applications for refund of Integrated tax paid on export of services for the period April – 2019 to September – 2019 in Form RFD -01A as per the provisions of Section 54 of the CGST Act, 2017, and all relevant documents in this regard were also furnished.
  • Subsequently deficiency memos were issued to Vodafone Idea limited calling for more document, which was duly complied by it through its letter dated 28.04.2021 and 18.05.2021.
  • Thereafter, two show cause notices dated 06.2021 & 06.07.2021 were issued to Vodafone Idea Limited by the respondent authorities, to show cause as to why their refund claims should not be rejected for the reasons mentioned in the show cause notices.
  • That Vodafone Idea Limited through its letter dated 29.06.2021 and 13.07.2021 duly replied to the aforesaid show cause notices. Later, by order dated 16.07.2021 & 19.07.2021, the refund claims filed by the Vodafone Idea Limited were rejected by the respondent authorities finding that the services provided was within the state of Maharashtra and cannot be considered as export of service.
  • That aggrieved of those two orders, the Appellant filed appeals before the Joint Commissioner of CGST and CX (Appeals). The Joint Commissioner by a common order dated 18.08.2021, allowed both the appeals of Vodafone Idea Limited allowing refund of Rs. 1,02,74,14,843/- along with appropriate interest.  Being aggrieved of this order, the revenue has filed the present petition.

Petitioner’s Submissions:

  • It was submitted on the behalf of Vodafone Idea Limited, that by virtue of IIR (Inbound Roaming Services) and ILD (International Long Distance, a person travelling to a country outside his usual place of residence wished to use telecom services from the same service provider (of his/her usual place of residence), with the same contact number. So, to provide uninterrupted services to such subscribers, almost all telecom service providers have an agreement with other telecom service providers in different countries to provide telecom services to their customers when they are travelling to other countries and vice-versa.
  • Further as per the agreement, Vodafone Idea limited is contractually obligated only to the Foreign Telecom Operators (FTOs) for the services under the agreement and the consideration is paid in convertible foreign exchange by the FTOs.
  • That giving an illustration it was submitted that as per the roaming arrangement entered into between HO (Home Operator) and the FTOs (Foreign Telecom Operator), the services would be provided by HO and FTOs for allowing its operators to make/receive calls while roaming. The HO raises invoice on FTOs, in the given case Vodafone Idea Limited is Home Operator and raises invoices on FTOs.  Thus, the supply of services fulfill all the conditions as mentioned in Section 2(6) of IGST Act, and would qualify as export of Services.
  • It was submitted that the place of supply where the services are consumed is outside India. Further, the place of supply and the location of the supplier is to be determined in terms of Section 13 of the IGST Act, and as per Section 13(2), the location of the service recipient for the services provided by Vodafone Idea Limited would be place of FTOs.
  • It was also submitted that conditions prescribed under Section 2(6) are complied with and the services IIR and ILD services have always been considered as export of services.
  • It was submitted on the behalf of Vodafone Idea Limited that, if the revenue contention of considering the place of supply within the territory for roaming services, is accepted, it would be counterproductive as ‘treating roaming services as domestic will lead to not only refund but no consequent demand of tax as well. Further Vodafone is paying service tax on reverse charge on the services received from FTOs, that will be discontinued considering place of supply outside and since inception i.e., 01.07.2017, Vodafone India limited would be liable for cash refund of such tax paid under reverse charge. As a result, there would be no cash outflow of tax under reverse charge and no GST payment in cash under reverse charge on inward supply of roaming services.  Therefore, the said roaming services technically and legally qualify as export of service.

Revenue Submissions:

  • It was submitted on the behalf of the revenue that the orders on which the Joint Commissioner had relied, have been challenged before this court and Hon’ble Supreme Court, so the question of law is still open. However, fairly admitted that there is no stay granted in any of the orders and the writ petitions can be entertained.
  • It was submitted that the order-in-original dated 19.07.2021 passed by the Deputy Commissioner of Central GST & Central Excise Commissionerate is correct and the order dated 18.08.2021 passed by the appellate authority is not correct.
  • Relying on the definition of export of services as provided in Section 2(6) of the IGST Act, it was submitted that the main condition is the place of services outside India, since the customers of FTOs make calls withing Maharashtra, the place of supply of service is within Maharashtra and not outside.
  • That in light of Section 13(3) (b) of IGST, condition (iii) of Section 2(6) as the place of supply outside India has not been fulfilled. Therefore, the said services cannot be considered as export of services, however it was admitted payment of services was received by the Vodafone Idea Limited in Convertible Foreign exchange.


  • The Hon’ble Court after considering the submissions made from the both sides and law applicable, referred to law stated in Section 2(6) (export of services), Section 13 (Place of supply of services where location of supplier or location of recipient is outside India), Section 2(24), Section 16 (Zero rated Supply), Section 20 (Application of provisions of Central Goods and Service Tax Act) of the IGST Act, 2017 as well as Section 2 (110) (Telecommunication Service), Section 2(93) (recipient of supply of goods and services) of the CGST Act, 2017 read with rule 96 (9) of the CGST Rules, found that as per Section 2(93) of the CGST “recipient” means where the consideration is payable for supply of goods or service, the person who is liable to pay the consideration. Clauses (b) and (c) of Section 2(93) is applicable when no consideration is payable.
  • It was found that in the present case the consideration is payable by FTO for the services rendered to it by Vodafone Idea Limited and as per the terms of the agreement with FTO, which were discussed by the adjudicating authority in the order, Vodafone Idea Limited is contractually obligated to FTOs only for the rendition of services as per the agreement, and there is no agreement with the subscribers of FTO. Moreover, it is not practically possible for Vodafone Idea to have agreement with subscriber of FTO.  Thus, the subscriber is not liable to make any payment to Vodafone Idea Limited.
  • Further from the agreement referred it is clear that the consideration is payable from FTO for the services provided to it. Therefore, undoubtedly FTO is a service recipient and subscriber of FTO cannot be considered as recipient of service.
  • It was found by the Hon’ble Court that section 13(3)(b) would not be applicable to the present case, as contended by revenue, as it starts with the words ‘services provide to an individual’ and in this case services have been provided to FTO. FTO further has provided the services to its subscriber, of which Vodafone Idea Limited has no idea.  Therefore, question of providing the services to subscribers of FTO does not arise as the invoices have been issued to FTO by Vodafone Idea and not to the subscribers.
  • The Hon’ble Court agreed with the concept that ‘customer’s customer cannot be your customer’. In the present case FTO is a customer of Vodafone Idea Limited and the subscribers of FTO are the customers of FTO and not Vodafone Idea, and this regard referred to the decisions, wherein the similar issue was dealt with in Vodafone Essar Cellular Ltd. V. CCE (2013) (31) STR 738 (Tri-Mum) and it was held that ‘The consideration for the service rendered is paid by the foreign service provider. There is no contract/agreement between the appellant and the subscriber of the foreign telecom service provider to provide any service. Since the contract for supply of service is between the appellant and foreign telecom service provider who pays for the services rendered, it is the foreign telecom service provider who is the recipient of the service. From the provisions of law relating to GST in UK and Australia, relied upon by the appellant, this position becomes very clear. Your customer’s customer is not your customer. When a service is rendered to a third party at the behest of your customer, the service recipient is your customer and not the third party.
  • Reference was also made to Board clarification vide Circular No. 111/5/2009-S.T., dated 24-2-2009 and similar cases in CST v Bayer Material Science (2015) 38 STR 1206 (Tri-Mumbai), ABS India Ltd. v CST (2009) 13 STR 65 (Tri Bang).
  • Lastly, it was held that Section 13(3) (b) of the IGST Act, 2017, on which the Deputy Commissioner has relied, would not be applicable to the present case, as the services have been provided to FTO by Vodafone Idea Limited and not to the subscribers of FTO. Further Section 13 (2) of the IGST Act, provides for the place of supply of services, except the services specified in Section 13(3) and as the Vodafone Idea Limited has not provided services covered under Section 13(3), the place of supply of services by Vodafone Idea limited is location of FTO, which is outside India.

The Hon’ble Court with the above findings allowed the petition filed by Vodafone Idea Limited (Writ Petition No. 3221 of 2021) and dismissed the petition filed by revenue (Writ Petition (L) No. 12860 of 2022).

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