Dow Chemical International Private Ltd. Vs Commissioner of State Tax (GSTAT)
GSTAT, Mumbai held that Procurement Hub Services Rendered by Foreign Affiliate to Indian Recipient Constitute Import of Services and Not Intermediary Services
Summary: The GST Appellate Tribunal dismissed six refund appeals filed by a taxpayer seeking refund of IGST paid under the Reverse Charge Mechanism (RCM) on procurement-related services received from its Switzerland-based group entity. The taxpayer contended that the services qualified as “intermediary services” under Section 2(13) of the IGST Act, making the place of supply outside India under Section 13(8)(b), and therefore not liable to GST as import of services. The Tribunal, however, held that the foreign entity functioned as a centralized procurement hub providing substantive procurement and sourcing services on its own account rather than merely facilitating supplies between parties. Relying on judicial precedents including Columbia Sportswear and Blackberry India, the Tribunal concluded that the services constituted core procurement services and not intermediary services. Consequently, the place of supply was held to be in India, the transaction qualified as import of services, and the IGST paid under RCM was correctly levied. The refund claims were therefore rejected.
Facts:
- M/s. Dow Chemical International Private Limited (“the Appellant” / “Dow India”), an Indian company engaged in manufacturing and distributing chemical components, entered into a written Procurement Agreement dated July 01, 2021 with Dow Europe GmbH (“Dow Europe”), a Swiss-incorporated related entity within the global Dow Group that functions as the centralized procurement hub of the entire Group.
- Under the said Agreement, Dow Europe undertook activities such as identification, selection and approval of potential foreign suppliers, negotiation of procurement terms, facilitation of supply from selected suppliers to the Appellant, development of procurement strategies, supplier risk management, strategic sourcing, procurement governance, quality audits, and oversight of procurement.
- During the period January 2022 to June 2022, under the impression that the services received from Dow Europe constituted an “import of services” under Section 2(11) of the IGST Act, the Appellant discharged IGST under RCM amounting to 7,81,12,995/-, Rs. 1,12,62,629/-, Rs. 1,30,15,941/-, Rs. 1,47,89,813/-, Rs. 1,31,52,277/- and Rs. 38,56,339/- respectively (aggregate of approximately Rs. 13.41 Crores).
- Subsequently, the Appellant reversed the Input Tax Credit availed on the said RCM payments and filed refund applications under Section 54(1) of the MGST Act read with Rule 89 of the MGST Rules, contending that the services were in the nature of “intermediary services” under Section 2(13) of the IGST Act and that the place of supply under Section 13(8)(b) was outside India (Switzerland), thereby not attracting GST.
- The Deputy Commissioner of State Tax rejected the refund applications, and the Joint Commissioner of State Tax (Appeals), Raigad Division, Belapur, Navi Mumbai, vide impugned orders dated August 07, 2023, confirmed such rejection. Aggrieved, the Appellant preferred appeals before the GSTAT under Section 112 of the CGST Act, 2017.
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