Vodafone Idea Ltd. VS Union of India

Mr. Mishra argued that the order-in-original passed on 19.07.2021 by the Deputy Commissioner of Central GST & Central Excise Commissionerate was correct and that the appellate authority was incorrect. However, after reviewing both the order-in-original dated 19.07.2021 and the appeal order dated 18.08.2021 by the Joint Commissioner (Appeals), it was concluded that the latter is the correct order.

Vodafone Idea Limited, under a telecommunication license from the Government of India, provides telecom services, including international Inbound Roaming Services (IIR) and International Long Distance (ILD) Services to Foreign Telecom Operators (FTOs). The company is registered under the “Maharashtra Goods and Services Tax Act, 2017” with registration No. 27AAACB2100P1ZX. The services provided by Vodafone Idea Limited are considered export services as per section 2(6) of the “Integrated Goods and Services Tax Act, 2017” (IGST Act).

Section 16(3) of the IGST Act allows a registered person making zero-rated supply to claim a refund through two options: (a) supplying goods under bond or Letter of Undertaking (LuT) without payment of IGST, or (b) supplying goods with payment of IGST and subsequently claiming a refund of the tax paid.

Vodafone Idea Limited chose the second option, opting to export services with the payment of Integrated Tax and subsequently claimed a refund for the tax paid.

For the period between April 2019 to September 2019, Vodafone Idea Limited filed refund applications on 26.03.2021 and 20.05.2021 under Form RFD-01A. These applications were in accordance with Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Rule 96 of the Central Goods and Services Tax Rules, 2017 (Rules). Along with the applications, Vodafone Idea Limited submitted various supporting documents.

However, deficiency memos were issued by respondents 3 and 4, requesting additional documents to address the deficiencies noted. Vodafone Idea Limited responded to these memos and submitted the required documents through letters dated 28.04.2021 and 18.05.2021, thus complying with the requests to rectify the deficiencies in their refund applications.

In this case, Respondent No. 4 issued two show-cause notices on 14th June 2021 and 6th July 2021 to Vodafone Idea Limited, questioning the validity of their refund claims. Additionally, Respondent No. 3 raised further concerns in a letter dated 22nd June 2021. Vodafone Idea Limited responded to these notices on 29th June 2021 and 13th July 2021. Subsequently, Respondent No. 4 rejected Vodafone Idea Limited’s refund claims through two separate orders dated 16th July 2021 and 19th July 2021. The rejection was based on findings that the services provided by Vodafone Idea Limited were deemed to have taken place within Maharashtra and thus did not qualify as exports. Furthermore, claims amounting to Rs. 29,98,63,922/- for the period April 2019 to June 2019 were dismissed due to their submission beyond the two-year deadline from the date of receiving foreign currency consideration.

Displeased with these decisions, Vodafone Idea Limited filed appeals against them before the Joint Commissioner of CGST and CX (Appeals). In a consolidated ruling dated 18th August 2021, the Joint Commissioner allowed both appeals, thereby granting Vodafone Idea Limited eligibility for a refund totaling Rs. 1,02,74,14,843/- along with applicable interest. This decision has now been challenged by the revenue in its petition.

The case involves Vodafone Idea Limited and its dispute with the tax authorities regarding refund claims for services provided. Respondent No.4 issued two show-cause notices in June and July 2021, questioning Vodafone Idea’s refund claims and seeking explanations. Vodafone Idea responded to these notices in June and July 2021. Ultimately, Respondent No.4 rejected Vodafone Idea’s refund claims in July 2021, citing reasons including the classification of service location and the timing of the refund application.

Aggrieved by these rejections, Vodafone Idea appealed to the Joint Commissioner of CGST and CX (Appeals), who on August 18, 2021, ruled in favor of Vodafone Idea, allowing their appeals and determining them eligible for a substantial refund of Rs. 1,02,74,14,843 plus interest. The tax revenue department has contested this decision through a petition.

Vodafone Idea argues that its services, involving International Inbound Roaming (IIR) and International Long Distance (ILD) services, cater to customers who travel abroad but wish to use their home telecom services seamlessly. Vodafone Idea operates under agreements with foreign telecom operators (FTOs), providing services under contractual obligations, with payments received in foreign currency.

In essence, Vodafone Idea’s services facilitate international roaming and long-distance calls, ensuring continuity of telecom services for travelers. The dispute hinges on whether these services qualify as exports and are eligible for tax refunds under relevant regulations.

This summary captures the core legal and factual elements of the case involving Vodafone Idea Limited’s refund claims and the subsequent appeals process.

Vodafone Idea Limited (VIL) faced a series of regulatory challenges concerning its refund claims for certain services provided. Respondent No. 4 issued two show-cause notices on June 14, 2021, and July 6, 2021, questioning the validity of these claims. Additionally, Respondent No. 3 sought explanations from VIL through a letter dated June 22, 2021. VIL responded to these notices on June 29, 2021, and July 13, 2021.

Subsequently, Respondent No. 4 rejected VIL’s refund claims in orders dated July 16, 2021, and July 19, 2021. The rejection was primarily based on the determination that the services provided by VIL were not eligible for export benefits under tax laws, citing that the place of supply was within the State of Maharashtra and the claims were filed after the permissible period.

In response, VIL filed appeals challenging these decisions with the Joint Commissioner of CGST and CX (Appeals), who ruled in favor of VIL on August 18, 2021. This ruling deemed VIL eligible for a refund of Rs. 1,02,74,14,843/- plus interest. Dissatisfied with this outcome, the revenue authority petitioned against the appeals.

VIL’s contention revolves around the nature of its services, particularly international roaming and long-distance telecommunications. They argue that these services qualify as exports under the IGST Act, meeting the criteria of being provided under contracts with foreign telecom operators (FTOs) and paid for in convertible foreign exchange. According to VIL, the place of supply for these services is outside India, thus making them eligible for tax benefits associated with export of services.

This dispute hinges on whether VIL’s services indeed qualify as exports under Indian tax laws, which remains a pivotal point of contention between VIL and the revenue authorities.

Vodafone Idea Limited (Vodafone) faced two show-cause notices from Respondent No.4 in June and July 2021 regarding refund claims, alleging that services provided by Vodafone from Maharashtra couldn’t be considered exports. They rejected a refund claim of Rs. 29,98,63,922 for filing beyond the stipulated period. Vodafone responded to these notices but faced rejection of their claims by orders dated July 16 and 19, 2021.

Vodafone appealed these decisions to the Joint Commissioner of CGST and CX (Appeals), who on August 18, 2021, ruled in favor of Vodafone, allowing their appeals. This decision made Vodafone eligible for a refund of Rs. 1,02,74,14,843 along with interest. The revenue challenged this order in its petition.

Vodafone argued that its services (International Inbound Roaming and International Long Distance) qualify as exports under the IGST Act, fulfilling conditions under Section 2(6) of the Act. They maintained that the place of supply, where the recipient (Foreign Telecom Operator) is located, is outside India as per Section 13 of the IGST Act.

Mr. Shroff, representing Vodafone, contended that accepting the revenue’s view would be counterproductive, leading to complications in tax treatment and refunds already paid under IGST. He highlighted Vodafone’s compliance with GST under reverse charge for services received from foreign operators, which would cease if roaming services were treated as domestic.

In summary, the dispute revolves around whether Vodafone’s services qualify as exports under the IGST Act, with significant financial implications for both parties based on the interpretation of place of supply rules and export criteria. 

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