Roaming Services And International Long Distance Services Provided By Vodafone Idea To Foreign Telecom Operators Is An Export Of Service: Bombay High Court

The Bench, consisting of Justices K. R. Shriram and Milind N. Jadhav, observed that Vodafone Idea had entered into agreements with the FTOs and that there was no mention of any agreement with the subscribers of the FTOs. Hence, the Court ruled that the subscribers of the FTO cannot be considered as the recipient of the services and that the said services rendered by Vodafone Idea were supplied to the FTOs.

Noting that the provisions of Section 13(2) of the IGST Act were applicable, the Court held that the place of supply of service was the location of the recipient of the service, i.e., the location of the FTO, which was outside India.

Under the telecommunication license received from the Government of India, the petitioner Vodafone Idea Limited provides telecom services, including international Inbound Roaming Services (IIR) and International Long Distance (ILD) Services to Foreign Telecom Operators (FTOs). Vodafone Idea Limited is registered under the Maharashtra Goods and Services Tax Act, 2017.

Vodafone Idea exported services on payment of Integrated Goods and Service Tax (IGST) and subsequently, claimed refund of such tax paid, as provided under Section 16(3) of the Integrated Goods and Services Tax Act, 2017 (IGST Act).

Vodafone Idea applied for refund of IGST paid on export of the said services, i.e., the Inbound Roaming Services and the International Long Distance Services to Foreign Telecom Operators, in accordance with the provisions of Section 54 of the Central Goods and Service Tax Act, 2017 (CGST Act) read with Rule 96 of the Central Goods and Service Tax Rules, 2017 (CGST Rules).

The revenue authorities passed an order rejecting the refund claims of Vodafone Idea Limited on the ground that the place of supply of services provided by Vodafone Idea was the State of Maharashtra and therefore, it cannot be considered as export of services. Against this, Vodafone Idea filed an appeal before the Joint Commissioner of CGST and Central Tax (Appeals), who allowed the appeal.

Vodafone Idea filed a writ petition before the Bombay High Court seeking a direction to the revenue authorities to implement the order passed by the Joint Commissioner (Appeals) of allowing the refund claims of Vodafone Idea.

Challenging the order passed by the Joint Commissioner (Appeals), the revenue department filed a writ petition before the Bombay High Court.

The petitioner Vodafone Idea submitted before the High Court that all telecom service providers have an agreement with other telecom service providers in different countries or circles to provide telecom services to their customers when they are traveling to other countries and vice versa.

Thus, Vodafone Idea averred that it was contractually obligated only to the Foreign Telecom Operators (FTOs) for the roaming telecommunication services and the international long distance call services rendered under the agreement. Vodafone Idea added that the consideration was payable to it by the FTOs in convertible foreign exchange.

Vodafone Idea contended that the location of the recipient of the services rendered by Vodafone Idea is that of the FTO's and hence, the place of supply where the services were consumed was outside India. The petitioner averred that the international Inbound Roaming Services (IIR) and the International Long Distance (ILD) Services have always been considered as export of services.

Thus, the petitioner Vodafone Idea submitted that the contention of the revenue department that the place of supply for the roaming services provided by it was within the taxable territory of India cannot be accepted.

The revenue department contended that "export of services" is defined under Section 2(6) of the IGST Act; and that as per the third condition prescribed therein, for a supply to qualify as export of service it is necessary that the place of supply of service is outside India.

The revenue department averred that the roaming services provided by Vodafone Idea to customers of foreign entities were actually consumed in India by the customers visiting India from abroad. The revenue department submitted that since the customers of the FTOs made calls within the territory of Maharashtra, the place of supply of service was within Maharashtra and not outside India.

Thus, the revenue department contended that in the light of Section 13(3)(b) of the IGST Act, the said third condition prescribed under Section 2(6) of the IGST Act, i.e., the requirement of the place of supply being outside India, has not been fulfilled. Therefore, the revenue department averred that the said services cannot be treated as export of services.

The Court observed that the provisions of Section 13 of the IGST Act apply for determining the place of supply of services where the location of the supplier or the location of the recipient is outside India. The Court noted that as per Section 13(3)(b), where the services supplied to an individual require the physical presence of the recipient, or the person acting on his behalf, with the supplier for the supply of the services, the place of supply of the said services shall be the location where the services are actually performed.

The Court noted that as per Section 2(93) (a) of the CGST Act, where a consideration is payable for supply of goods or services, the term "recipient" means the person who is liable to pay the consideration. The Court noted that the consideration was payable by the FTO for the services rendered to it.

The Court observed that Vodafone Idea entered into agreements with the FTOs and that there was no mention of any agreement with the subscribers of the FTO. The Court further noted that Vodafone Idea was contractually obligated only to the FTOs for the services rendered under the agreement and that the consideration was payable by the FTOs in convertible foreign exchange. Thus, the Court noted that the subscribers of the FTO were not liable to make any payment to Vodafone Idea.

Hence, the Court ruled that the subscribers of the FTO cannot be considered as the recipient of the services and that the said services were supplied to the FTO. The Court added that the FTO had further supplied services to their individual subscribers. Therefore, the Court held that the supplier of services was Vodafone Idea and the recipient of the services was the FTO. The Court added that the fact that Vodafone Idea had issued invoices to FTO and not to any individual subscriber, substantiated the fact that the said services were not provided to an individual.

"We would agree with the concept that customer's customer cannot be your customer. In the case at hand customer of Vodafone Idea Limited is the FTO and the subscribers of FTO are the customers of FTO. When a service is rendered to a third party customer of FTO - your customer, the service recipient is your customer and not the third party customer of FTO.", the Court held.

The Court ruled that since Vodafone Idea had provided services to FTOs and not to the individual subscribers of FTOs, therefore, Section 13(3)(b) of the IGST Act was not attracted.

The Court held that in view of Section 13(2) of the IGST Act, the place of supply of services, except the services specified in Section 13(3) to Section 13(13), shall be the location of the recipient of the services.

The Court ruled that since Vodafone Idea had supplied services to the FTO and not to an Individual, and since Vodafone Idea had not supplied services specified in Section 13(3) to Section 13(13) of the IGST Act, therefore, the place of service or supply of service was the location of the recipient of the service, i.e., location of the FTO, which was outside India.

The Court refuted the contention of the revenue department that the FTO had authorised its subscribers to be its representative and that the individual subscribers of the FTO were acting on behalf of the FTO as its agent.

"In this regard, there is nothing to substantiate that the subscriber is acting on behalf of the FTO. The relationship between the FTO and the subscriber is on principal to principal basis and not on principal and agent basis. In this case, if the subscriber notices any deficiency in service he cannot talk directly to Vodafone Idea Ltd as representative of the FTO. The subscriber has to approach the FTO for the purpose of rectifying the deficiency. We find that this itself would substantiate that the subscriber is not representative or agent of the FTO. Further, we find no evidence to substantiate that the FTO has authorised its subscriber to be its representative.", the Court held.

Hence, the Court ruled that the provisions of Section 13(2) of the IGST Act were applicable and not the provisions of Section 13 (3)(b) and consequently, the place of service or the supply of service rendered by Vodafone Idea was outside India.

The Court, thus dismissed the writ petition filed by the revenue department and allowed the writ petition of Vodafone Idea. Hence, the Court upheld the order of the Joint Commissioner (Appeals) allowing the refund claims of Vodafone Idea.

Case Title: Vodafone Idea Limited versus UOI and Ors.

AND

Commissioner of CGST & Central Excise, Mumbai versus Vodafone Idea Limited

Dated: 04.07.2022 (Bombay High Court)

Citation: 2022 LiveLaw (Bom) 260 

Counsel for Vodafone Idea Ltd.: Mr. Darius Shroff, Senior Advocate a/w. Mr. Vaibhav Patankar and Mr. Prasad Paranjape i/by Patankar and Associates

Counsel for the Revenue Department: Mr. Jitendra B. Mishra a/w. Mr. Satyaprakash Sharma and Mr. Ranjith Aithe

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