Explain stance on notices to companies over affiliates: Gujarat HC tells tax department

The Gujarat High Court has asked the tax department to explain its stance on notices issued to Indian companies that were providing services to their affiliates and other group entities after the tax department had started refusing export benefits to these companies.

Synoptek India, an exporter, had approached the court in this regard following notices.

In this case, the company was deprived of its export refund under GST. The tax department said that the company was merely “a distinct establishment of the foreign client”.


Exporters are given incentives where they can potentially reduce their tax outgo. The government’s intention is to make exporters as competitive as possible. In most cases, exporters can partially or fully reclaim the GST they have paid on the goods or services they export.

Abhishek A Rastogi, partner at Khaitan & Co, who represented the company and argued before Gujarat High Court, said that the position assumed by the tax department was absurd in as much as the Indian tax assessee and its foreign client were completely distinct corporate entities and was duly incorporated under the applicable laws of each country.

Rastogi highlighted that the patently refund rejection was also contrary to the law laid down by the Gujarat High Court under the Service Tax era as well as a GST Board Circular, which is binding on all tax officers.

"On the return date, notify this matter on top of the board as the issue, prima-facie, appears to be covered by a direct decision of this high court and also, in light of the circular issued by the board (CBDT),” the Gujarat High Court ruled.