GST Refund Denied: GSTAT Holds Dow Europe's Procurement Services Are Not Intermediary Services

Background and Overview

The Goods and Services Tax Appellate Tribunal (GSTAT) recently adjudicated a consolidated batch of six appeals in the matter of Dow Chemical International Private Limited Vs Commissioner of State Tax (GSTAT), covering the tax periods from January 2022 to June 2022. At the heart of this dispute was the question of whether procurement support services rendered by a Switzerland-based group entity to its Indian affiliate qualified as "intermediary services" under Section 2(13) of the Integrated Goods and Services Tax Act, 2017 — and whether, consequently, the Indian entity was entitled to a refund of IGST paid under the Reverse Charge Mechanism (RCM).

The Tribunal ultimately ruled against the assessee, confirming the refund rejections issued at both the original authority and first appellate authority levels.

Parties and Contractual Arrangement

M/s Dow Chemical International Private Limited (the assessee) is an Indian company incorporated under the Companies Act, 1956, engaged in manufacturing and distribution of chemical components along with associated service activities. To streamline its procurement operations, the assessee executed a written Procurement Agreement dated 01.07.2021 with Dow Europe GmbH, a Switzerland-incorporated entity functioning as the centralized procurement hub of the global Dow group.

Under the terms of this agreement, Dow Europe GmbH undertook an extensive range of procurement-related activities on behalf of the assessee, including:

• Identifying, screening, and approving potential foreign suppliers
• Negotiating procurement terms and conditions
• Developing procurement strategies and governance frameworks
• Reviewing and signing contracts and purchase orders
• Facilitating the overall supply lifecycle between the assessee and third-party suppliers

The assessee consistently characterized these activities as facilitation of supply between itself and independent foreign suppliers — essentially positioning Dow Europe as a middleman rather than an independent service provider.

Tax Treatment and Refund Claims

During January 2022 to June 2022, operating under the belief that the services received from Dow Europe constituted "import of services" as defined under Section 2(11) of the IGST Act, 2017, the assessee discharged IGST under the RCM on payments made to Dow Europe. The amounts involved across six monthly periods were as follows:

Subsequently, upon internal review, the assessee revised its position and concluded that the services rendered by Dow Europe were actually "intermediary services" within the meaning of Section 2(13) of the IGST Act. The assessee reasoned that since the place of supply of intermediary services is fixed at the location of the service supplier under Section 13(8)(b) of the IGST Act — i.e., Switzerland in this case — the transactions fell outside the scope of import of services and therefore outside the GST net in India.

Acting on this revised understanding, the assessee reversed the Input Tax Credit (ITC) previously availed and filed six refund applications under Section 54(1) read with Rule 89 of the Maharashtra Goods & Services Tax Act, 2017 and Maharashtra Goods & Services Tax Rules, 2017.

Decisions of the Original Authority and First Appellate Authority

The Deputy Commissioner of State Tax (MUMBAI-LTU_515) rejected all six refund applications. On appeal, the Joint Commissioner of State Tax (Appeals), Raigad Division, Belapur, Navi Mumbai, vide orders dated 07.08.2023, confirmed the rejections. The first appellate authority recorded the following key findings:

A. The assessee had itself treated the services as import of services and discharged IGST on that basis. The subsequent reclassification as intermediary services was characterized as an afterthought with no contemporaneous basis.

B. In view of Section 2(11) of the IGST Act, 2017, read with Section 5(3) and Notification No. 10/2017 (Tax Rate) dated 28.06.2017, the services qualified as import of services, and the assessee was correctly liable to GST under the RCM.

C. The Procurement Agreement itself contained provisions that were inconsistent with the assessee's intermediary claim.

D. Specifically, Clause 6(b) of the agreement expressly provided that the assessee did not appoint Dow Europe GmbH as its agent and did not authorize Dow Europe to commit the assessee to any binding purchases or obligations.

E. Since Dow Europe GmbH was rendering services on its own account, such services fell squarely within the exclusionary portion of Section 2(13) and could not be classified as intermediary services.

Issues Framed by the GSTAT

The Tribunal identified the following mixed questions of law and fact for determination:

1. Whether the services provided by Dow Europe GmbH under the Procurement Agreement were ancillary services provided in relation to the main service.
2. Whether the services qualified as "intermediary services" under Section 2(13) of the IGST Act, attracting the place-of-supply rule under Section 13(8)(b), as applicable prior to the amendment dated 30.03.2026.
3. Whether the place of supply was determinable under Section 13(2) of the IGST Act (placing it in India) or under Section 13(8)(b) (placing it outside India).
4. Whether, in light of the answers to the above issues, the assessee was entitled to refund, and whether the lower authorities' orders warranted interference.

Submissions of the Assessee

The assessee, represented by Shri Mihir Prashant Deshmukh, assisted by Shri Shamik Gupte, advanced detailed arguments in support of intermediary classification:

Classification as Intermediary