Facts of the Case:

In this case, the petitioner M/s Dow Chemical International Private Limited, an Indian company engaged in the manufacture and distribution of chemical products, entered into a Procurement Agreement dated 01.07.2021 with its group entity, Dow Europe GmbH, Switzerland, which functioned as the centralized procurement hub for the global Dow Group.  Under the agreement, Dow Europe undertook a wide range of procurement-related activities, including identifying and evaluating suppliers, negotiating commercial terms, developing procurement strategies, managing supplier relationships, conducting procurement analytics, reviewing contracts, and facilitating procurement transactions for Dow India. During the period from January 2022 to June 2022, Dow India paid IGST under reverse charge mechanism on the consideration paid to Dow Europe, treating the transaction as an import of services.

Subsequently, the company reconsidered its tax position and claimed that the services rendered by Dow Europe were in the nature of “intermediary services” under Section 2(13) of the IGST Act. Since the place of supply for intermediary services under Section 13(8)(b) (as applicable during the relevant period) was the location of the supplier, namely Switzerland, the company contended that the transaction did not qualify as an import of services and that the IGST paid under reverse charge had been erroneously paid.

Accordingly, after reversing the input tax credit availed on such tax payment, the company filed refund applications under Section 54 of the CGST Act. The refund claims were rejected by the adjudicating authority and the rejection was upheld by the first appellate authority, leading to the present appeals before the GST Appellate Tribunal.

Issue:

Whether the procurement and sourcing services provided qualified as “intermediary services” under Section 2(13) of the IGST Act, 2017. Consequentially, the Tribunal was required to determine whether the place of supply was governed by Section 13(8)(b), resulting in a place of supply outside India, or by Section 13(2), resulting in the place of supply being India. The Tribunal also had to decide whether the services constituted taxable import of services liable to GST under reverse charge and whether Dow India was entitled to refund of the IGST paid.

Held That:

The GST Appellate Tribunal dismissed all six appeals and upheld the rejection of the refund claims. The Tribunal held that although the arrangement involved multiple parties and Dow Europe facilitated procurement transactions between Dow India and third-party suppliers, the services rendered by Dow Europe could not be characterized as intermediary services. Examining the Procurement Agreement and the actual nature of activities performed, the Tribunal observed that Dow Europe functioned as the centralized procurement hub for the entire Dow Group and independently rendered comprehensive procurement and sourcing services on its own account.

The services extended beyond mere facilitation and included strategic procurement functions, supplier management, procurement governance, procurement analytics, quality assessments, and negotiation support. Such services constituted substantive and core procurement services rather than ancillary facilitation services.

The Tribunal placed considerable reliance on the principles laid down by the Karnataka High Court in Columbia Sportswear India Sourcing Pvt. Ltd. and the Delhi High Court in Blackberry India Pvt. Ltd., wherein services rendered independently on a principal-to-principal basis were held not to constitute intermediary services. Applying the CBIC Circular No. 159/15/2021-GST, the Tribunal held that one of the essential requirements for intermediary services is the existence of a distinct ancillary supply facilitating a separate principal supply. In the present case, Dow Europe itself supplied the procurement services and therefore fell within the exclusionary portion of Section 2(13), which excludes persons supplying services on their own account.

The Tribunal further observed that Dow Europe neither acted as an agent of Dow India nor possessed authority to bind Dow India contractually. The agreement specifically established an independent contractor relationship. Accordingly, the services were held to be supplied by Dow Europe on a principal-to-principal basis and not as an intermediary arranging or facilitating supplies between two principals. Consequently, Section 13(8)(b) of the IGST Act was held inapplicable and the place of supply was determined under Section 13(2), resulting in the place of supply being India. The services therefore qualified as import of services liable to GST under reverse charge mechanism.

While disagreeing with the appellate authority’s observation that the refund claim was merely an “afterthought,” the Tribunal clarified that a taxpayer is entitled to seek refund of taxes paid under a mistaken understanding of law within the statutory framework of Section 54. However, since the tax was legally payable on the import of services, the refund claims lacked merit. Accordingly, all refund applications were rejected and the orders of the lower authorities were affirmed.

Case Name: M/s. Dow Chemical International Private Ltd., Through Its Director, Shri Rahunathangavel Versus Commissioner Of State Tax, Mazgaon, Mumbai Asheesh Sharma & Ors. dated 04.06.2026

To read the complete judgement 2026 Taxo.online 1559