(2026) 1 GSTAT E-Journal 15 (Principal Bench)Place of SupplyDecision: In Favour of DGAP / Revenue
GSTAT on Centralized Procurement Hubs: Exclusion from Intermediary Under Section 2(13) and Place of Supply as Import of Services
The GSTAT Principal Bench held that procurement and sourcing operations rendered on own account by a foreign centralized group hub are not intermediary services under Section 2(13) of the IGST Act, but qualify as an import of services taxable in India under Section 13(2).
Case Name / Parties
Dow Chemical International (P.) Ltd. v. Commissioner of State Tax
Appeal Number
APL 2 TO 7 (PB) OF 2026
Tribunal Bench
Principal Bench
Date of Judgment / Order
04/06/2026
Coram
Justice (Retd.) Dr. Sanjaya Kumar Mishra, President • Shri Anil Kumar Gupta, Technical Member
For Appellant: Shri Mihir Prashant Deshmukh, Advocate, assisted by Shri Shamik Gupte, Advocate
For Respondent: Ms. Shwetal Shepal, Advocate
Facts of the Case
The Appellant, an Indian chemical manufacturer, entered into a Procurement Agreement dated 01.07.2021 with group affiliate Dow Europe GmbH (Switzerland) functioning as a centralized procurement hub for the global Dow Group. Under the agreement, Dow Europe carried out comprehensive vendor identification, procurement strategy, spend analytics, and quality audits. For the period January 2022 to June 2022, the Appellant discharged IGST under reverse charge (RCM) across six appeals: ₹7,81,12,995/-, ₹1,12,62,629/-, ₹1,30,15,941/-, ₹1,47,89,813/-, ₹1,31,52,277/-, and ₹38,56,339/- (aggregating approximately ₹13.42 Crore) on consideration paid to Dow Europe. Subsequently, forming the view that Dow Europe was an 'intermediary' under Section 2(13) of the IGST Act with place of supply outside India (Switzerland) under Section 13(8)(b), the Appellant reversed the ITC and filed refund applications under Section 54. The Adjudicating Authority and First Appellate Authority rejected the refunds, holding that Dow Europe provided core procurement operations as an independent contractor on principal-to-principal terms, and dismissed the refund claim as an afterthought.
Issues Before GSTAT
- 1Whether the services provided by Dow Europe GmbH qualify as 'intermediary services' within the meaning of Section 2(13) of the IGST Act or constitute core procurement services on own account.
- 2Whether the place of supply of the procurement services is to be determined under Section 13(2) (India - location of recipient) or Section 13(8)(b) (outside India - location of supplier).
- 3Whether an application for refund under Section 54 can be rejected as an 'afterthought' merely because the taxpayer initially paid tax under reverse charge under a mistake of law.
- 4Whether CBIC Circular No. 159/15/2021-GST and State Advance Rulings (AAR) have binding effect on the GST Appellate Tribunal.
Relevant Statutory Provisions & Rules
Statutory Sections
Section 2(11) of IGST Act, 2017Section 2(13) of IGST Act, 2017Section 5(3) of IGST Act, 2017Section 13(2) of IGST Act, 2017Section 13(8)(b) of IGST Act, 2017Section 54 of CGST Act, 2017Section 103 of CGST Act, 2017Section 112 of CGST Act, 2017
GST Rules
Rule 89 of CGST Rules, 2017Rule 110 of CGST Rules, 2017
Circulars & Notifications
Circular No. 159/15/2021-GST dated 20.09.2021Notification No. 10/2017-Central Tax (Rate) dated 28.06.2017Notification No. 28/2012-ST dated 20.06.2012
Contentions of the Parties
Appellant / Taxpayer Contentions
- •The arrangement involved three parties (Dow India, Dow Europe, foreign supplier) and two distinct supplies (main supply of chemicals and ancillary supply of procurement facilitation).
- •Dow Europe did not supply the goods itself but merely arranged and facilitated the supply, charging a commission of 3.5% on purchases, fulfilling all tests of CBIC Circular No. 159/15/2021-GST.
- •The independent contractor clause in the agreement does not negate intermediary character, as an intermediary by definition acts without agency authority to bind the principal.
- •Taxes paid under a misconception of law are legally refundable under Section 54 and cannot be branded as an afterthought.
Respondent / Revenue Contentions
- •Dow Europe rendered substantive, core procurement management (spend analytics, supplier risk management, strategy) on its own account as an independent contractor, falling under the exclusionary limb of Section 2(13).
- •The arrangement between two multinational group entities represents procurement outsourcing, not brokerage or agency facilitation.
- •The transaction is an import of services with the recipient and place of effective consumption in India under Section 13(2).
- •Taxpayers cannot alter their characterization of a transaction from import to intermediary merely to claim cash refunds of taxes paid voluntarily.
Findings of GSTAT
To qualify as an 'intermediary' under Section 2(13), four conditions must be met: (i) minimum of three parties, (ii) two distinct supplies (main and ancillary facilitation), (iii) character akin to an agent or broker, and (iv) the provider must NOT supply goods/services on its own account. While three parties were involved, the second and fourth conditions failed because Dow Europe provided core substantive procurement operations on its own account as a group hub.
The presence of an independent contractor clause (Clause 6(b)) establishing that Dow Europe had no authority to bind Dow India confirmed that the foreign affiliate provided direct, principal-to-principal services rather than acting as a broker.
The place of supply is governed by the default rule of Section 13(2) (location of recipient in India), making the transaction an import of services liable to IGST under RCM under Section 5(3).
The Tribunal disapproved the First Appellate Authority's observation that refund applications for taxes paid under mistake can be dismissed as an 'afterthought'. Section 54 explicitly permits refund of mistaken tax payments. However, since the services are taxable as an import on merits, the refund claims were rightly rejected.
CBIC Circulars and AAR rulings (Section 103) do not bind the Tribunal, though circulars have persuasive value for interpretation.
Ratio Decidendi
Key Legal Principle
“Core procurement and sourcing operations independently rendered on own account by a centralized foreign group hub fall outside the definition of 'intermediary' under Section 2(13) of the IGST Act, and constitute an import of services with the place of supply situated in India under Section 13(2).”
Final Decision & Relief Granted
Outcome: The appeals filed by the taxpayer were dismissed on merits. The rejection of refund claims totaling ₹13,42,03,094/- was confirmed on the finding that the transactions constituted an import of services with place of supply in India under Section 13(2) of the IGST Act.
Relief Granted: Clarification that refund applications cannot be rejected as afterthoughts under Section 54; however, no monetary refund granted as tax liability under RCM was confirmed on merits.
Operative relief was verified against the Tribunal's order and accurately summarized without altering its legal effect.
Practical Implications for Taxpayers
- Multinational groups operating centralized offshore procurement hubs cannot classify group sourcing fees as non-taxable intermediary services merely because consideration is computed as a percentage mark-up on purchases.
- Carefully review the master service agreements: clauses declaring the offshore entity as an 'independent contractor' with no power to bind the Indian entity establish principal-to-principal services.
- Taxpayers can legitimately seek refunds of RCM paid under mistake of law without fear of dismissal as an 'afterthought', provided the underlying substantive non-taxability is legally solid.
Practical Takeaways for Tax Professionals
- Differentiate buying support services: where an offshore entity performs core strategic functions (risk management, vendor selection, audits), revenue authorities and tribunals will treat it as a direct service provided on own account.
- Do not rely solely on favorable Advance Rulings (AAR), as Section 103 restricts their binding force strictly to the applicant and concerned officer. High Court and Tribunal jurisprudence will prevail.
- When structuring procurement agreements, examine whether the services constitute export/import of principal services or an ancillary facilitation before adopting reverse charge or refund positions.
SKM
Editorial Commentary
SKM Laws Professional Analysis
The Dow Chemical ruling provides critical clarity on the outer boundaries of 'intermediary services' under Section 2(13) of the IGST Act. While earlier controversies often centered on Indian BPOs/service providers seeking export status, this case deals with the converse scenario: an Indian recipient seeking to treat foreign procurement support as an intermediary service with place of supply abroad to secure an RCM refund. The Tribunal strictly enforced the exclusionary limb of Section 2(13) ('does not include a person who supplies such goods or services on his own account'). By finding that strategic sourcing and quality audits are substantive services provided on own account, GSTAT closed the door on classifying centralized shared-service hubs as mere intermediaries. Equally crucial is GSTAT's judicial repudiation of the Department's routine 'afterthought' objection against Section 54 refund claims.
Related Cases & Precedents
Columbia Sportswear India Sourcing (P.) Ltd. v. Union of India
[2025] 174 taxmann.com 936 (Kar)
Distinguished on facts regarding buying support services and cost-plus consideration.
(2026) 1 GSTAT E-Journal 99
GSTAT analysis of supply chain genuineness and refund admissibility under Section 54.
Related GST Tools & Utilities
Source Citation & Forensic References:
Official Citation: (2026) 1 GSTAT E-Journal 15 (Principal Bench)
Source Publication: GSTAT E-Journal, Volume I (Till 31.08.2026), Published by Goods and Services Tax Appellate Tribunal
Journal Pages: 15-32
Legal Information Disclaimer
This case law analysis is published strictly for informational, educational, and research purposes. It does not constitute legal, tax, or professional advice. The ratio decidendi and commentary reflect professional editorial interpretations of the Goods and Services Tax Appellate Tribunal's reported judgment. Readers must refer to the full certified order of the Tribunal before initiating or defending litigation.