Roaming Services Classified as Export: Bombay High Court’s Ruling in Vodafone Idea Limited Vs Union of India

1. Background of the Dispute

The Bombay High Court in Vodafone Idea Limited Vs Union of India was confronted with two cross writ petitions arising from the same appellate order under the GST regime.

  • Writ Petition No. 3221 of 2021 was filed by Vodafone Idea Limited, seeking implementation of an order-in-appeal dated 18.08.2021 passed by the Joint Commissioner (Appeals-II), CGST and Central Tax, Mumbai, sanctioning a refund of ₹1,02,74,14,843 of Integrated GST (IGST) for the period April 2019 to September 2019.
  • Writ Petition (L) No. 12860 of 2022 was filed by the Revenue, assailing the very same appellate order and requesting that it be quashed.

The appellate authority had allowed two refund appeals:

  • Appeal No. 257 of 2021 – period May 2019 to June 2019, refund amount ₹50,30,92,587
  • Appeal No. 258 of 2021 – period July 2019 to September 2019, refund amount ₹52,43,22,256

Since the outcome of Revenue’s challenge would directly impact Vodafone Idea Limited’s refund enforcement petition, the High Court decided to treat the Revenue’s writ as the lead matter and hear both sides finally, by consent, at the admission stage itself.

The Court evaluated:

  • The order-in-original dated 19.07.2021 passed by the Deputy Commissioner of CGST & Central Excise Commissionerate rejecting the refund; and
  • The order-in-appeal dated 18.08.2021 passed by the Joint Commissioner (Appeals) allowing the refund.

On examination, the Court concluded that the appellate order was legally sound and the adjudicating authority’s approach was flawed.

2. Nature of Services and Vodafone Idea Limited’s Position

Vodafone Idea Limited, holding a telecommunication licence from the Government of India, provides telecommunication services including:

  • International Inbound Roaming (IIR) services; and
  • International Long Distance (ILD) services

These services are supplied to Foreign Telecom Operators (FTOs) under contractual arrangements. Vodafone Idea Limited is registered under the Maharashtra Goods and Services Tax Act, 2017 (MGST Act) with GSTIN 27AAACB2100P1ZX.

Vodafone Idea Limited asserted that:

  • Its IIR and ILD services qualify as “export of services” under Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act);
  • It opted, in terms of Section 16(3) of the IGST Act, to supply services on payment of IGST and thereafter seek refund of the tax paid (second option), instead of supplying under bond/Letter of Undertaking without payment of IGST;
  • Refund applications under Form RFD-01A were filed for the period April 2019 to September 2019, under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) read with Rule 96 of the Central Goods and Services Tax Rules, 2017 (Rules).

On receipt of deficiency memos, Vodafone Idea Limited submitted additional supporting documents and clarifications. However, two show-cause notices dated 14.06.2021 and 06.07.2021 followed, culminating in rejection orders dated 16.07.2021 and 19.07.2021, in which:

  • The authorities held that the place of supply of these services was within the State of Maharashtra, thereby disqualifying the supplies from being treated as export of services; and
  • Part of the refund amount (₹29,98,63,922 for April 2019–June 2019) was rejected as time-barred, allegedly filed beyond the two-year limitation from the date of receipt of foreign currency.

Vodafone Idea Limited successfully challenged these orders in appeal before the Joint Commissioner (Appeals), and sought enforcement of that favorable decision through its writ petition.

3. How the Roaming and ILD Arrangements Operate

Vodafone Idea Limited explained the commercial and technical construct of IIR and ILD services as follows: