Karnataka High Court Quashes GST Demand: Services to US Parent Held Outside India’s Tax Net
Court Clarifies Place of Supply Rules for Exported Services
Ruling Strengthens India’s Position as Global Outsourcing Hub
By Our Legal Reporter
New Delhi: January 15, 2026:
In a landmark decision, the Karnataka High Court has quashed a Goods and Services Tax (GST) demand raised against Iqvia RDS (India) Pvt. Ltd., a subsidiary of a US-based company engaged in clinical trial and data management services. The Court ruled that services provided to the company’s US parent were not taxable in India, as the place of supply was outside India.
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This ruling is significant for India’s outsourcing and IT-enabled services sector, which caters to global clients. It clarifies the interpretation of Section 13 of the Integrated Goods and Services Tax (IGST) Act, 2017, and reinforces India’s commitment to supporting exports of services.
Case Background
- The Company: Iqvia RDS (India) Pvt. Ltd., a Bengaluru-based subsidiary of a US multinational, provides data management and clinical trial services.
- The Agreement: Services were rendered under a Master Service Agreement with its US parent company.
- The Dispute: Tax authorities demanded GST on these services, arguing that they were provided from India.
- Legal Question: Could GST be levied when the service recipient was located outside India?
Court’s Observations
Justice S.R. Krishna Kumar delivered the ruling, making several key points:
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- Circular No. 209/1/2018-ST (dated May 4, 2018): Clarifies that for software and IT-enabled services (testing, debugging, modification, customization, adaptation, upgrading, enhancement, or implementation), the place of supply is the recipient’s location.
- Application to Case: The Court held that Iqvia’s services fell within this definition, as they were data management services provided to the US parent.
- Sections Applied:
- Section 9 of CGST Act – Governs levy of GST.
- Section 13 of IGST Act – Determines place of supply for cross-border services.
- Section 16 of IGST Act – Defines “zero-rated supply” for exports.
- Final Ruling: The GST demand was quashed, and the services were deemed export of services, exempt from GST.
Implications of the Ruling
For IT and Outsourcing Companies
- Clarity on Taxation: Confirms that services provided to foreign clients are not taxable in India.
- Boost to Exports: Reinforces India’s position as a global outsourcing hub.
- Reduced Litigation: Provides judicial clarity, reducing disputes with tax authorities.
For Tax Authorities
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- Guidance on Place of Supply: Ensures consistent application of rules in future cases.
- Revenue Considerations: While protecting exporters, the ruling limits GST collections on cross-border services.
For NRIs and Global Businesses
- Ease of Doing Business: Simplifies compliance for Indian subsidiaries of foreign companies.
- Encourages Investment: Strengthens India’s attractiveness for multinational corporations outsourcing services.
Wider Context
India’s IT and outsourcing industry contributes significantly to exports. Disputes over GST applicability have created uncertainty for companies providing services abroad. This ruling:
- Aligns with Global Practice: Most countries exempt exports of services from domestic taxes.
- Supports Government Policy: India’s GST framework aims to promote exports by treating them as zero-rated supplies.
- Encourages Growth: Provides confidence to companies investing in India’s service sector.
Conclusion
The Karnataka High Court’s ruling in Iqvia RDS (India) Pvt. Ltd. vs. Union of India is a landmark in GST jurisprudence. By holding that services provided to a US parent company are outside India’s tax net, the Court has reinforced the principle that exports of services must remain tax-free.
For India’s outsourcing industry, this judgment is a major boost, ensuring clarity, reducing litigation, and strengthening India’s global competitiveness.
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