In a significant development for India’s burgeoning study abroad sector, the Supreme Court of India has delivered a landmark ruling. On September 1, 2025, the apex court dismissed an appeal filed by the GST Department, thereby upholding a crucial Bombay High Court judgment in favor of KC Overseas Education. This definitive decision clarifies that commissions earned in foreign currency by Indian overseas education consultants from foreign universities will be treated as an “export of service” and are therefore not subject to Goods and Services Tax (GST). This verdict brings much-needed clarity and relief, reshaping the financial landscape for the entire industry.
Unpacking the Case: The GST Conundrum for Foreign Education Consulting
For years, the Indian overseas education consulting industry has been grappling with an intricate tax dilemma. The core of the legal dispute revolved around the classification of services provided by these consultants to foreign universities under the Goods and Services Tax (GST) regime.
The Background on the Legal Issue:
Indian consultants play a vital role in facilitating thousands of students’ dreams of studying abroad. They market foreign universities, assist students with applications, and receive commissions from these foreign institutions for successful enrollments. The question was: Does this commission attract GST?
The Tax Department’s Stance: “Intermediary Services”
The GST Department consistently argued that Indian overseas education consultants, like KC Overseas, acted as “intermediaries.” Under Section 13(8)(b) of the Integrated Goods and Services Tax (IGST) Act, the “place of supply” for intermediary services is deemed to be the location of the service provider—in this case, India. This interpretation would mean that the commission received by consultants would be taxable under GST, typically at an 18% rate. Their reasoning was that consultants were merely facilitating a transaction between the foreign university and the Indian student.
The Consultants’ Counter-Argument: “Export of Services”
Conversely, the industry, led by entities like KC Overseas Education, firmly contended that their services qualified as “export of services.” They argued that they were directly providing marketing and recruitment services to their foreign university clients, who are located outside India. Since the payment for these services was received in convertible foreign exchange, it met the criteria for an “export of service” and should therefore be zero-rated for GST, making them eligible for refunds on any GST previously paid.
The Central Conflict
At the heart of this prolonged battle was the interpretation of “intermediary services” versus “export of services.” The tax department’s view appeared to conflict with the fundamental “destination-based” principle of GST, which aims to tax consumption in the location where it truly occurs. If the service recipient (foreign university) is outside India, and the benefit accrues abroad, taxing it in India seemed counterintuitive to the export promotion agenda.
The Road to Resolution: Bombay High Court & Supreme Court Rulings
The legal journey saw several critical milestones:
Bombay High Court Verdict (March 3, 2025):
The Bombay High Court delivered a decisive verdict that provided the first major relief to the industry. It categorically ruled that overseas education consultants are not intermediaries. Instead, the court recognized them as direct suppliers of services to foreign universities on a principal-to-principal basis. Consequently, the commission they receive in foreign currency was declared an “export of service” and, crucially, not liable for GST. This ruling set a powerful precedent and was a significant win for KC Overseas Education.
Supreme Court Verdict (September 1, 2025):
The final arbiter, the Supreme Court of India, put an end to the uncertainty. By dismissing the GST Department’s Special Leave Petition challenging the Bombay High Court’s ruling, the Supreme Court effectively upheld the lower court’s decision. This dismissal serves as a definitive clarification, solidifying the legal position that services rendered by Indian overseas education consultants to foreign universities are indeed to be considered “export of services” for GST purposes.
Technical Aspects: Decoding the “Export of Service” Definition
To qualify as an “export of service” under the IGST Act, five key conditions must be met:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply of service is outside India.
- The payment for such service has been received by the supplier in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India.
- The supplier of service and the recipient of service are not merely establishments of a distinct person.
The crux of the Supreme Court’s decision hinges on fulfilling condition 3 – ensuring the place of supply is outside India, thereby debunking the “intermediary service” argument where the place of supply would default to India. This legal interpretation aligns the spirit of GST, which is a consumption-based tax, with the reality of international service provision.
Far-Reaching Implications for the Industry:
The Supreme Court’s ruling sends positive ripples throughout the entire Indian overseas student recruitment industry:
Unprecedented Clarity:
The verdict brings absolute legal certainty to a long-disputed area, allowing consultants to operate without the looming threat of retrospective GST demands.
Significant GST Relief & Potential Refunds:
Education consultants can now confidently stop levying and paying GST on their foreign university commissions. Furthermore, the decision opens avenues for them to revisit past GST payments and potentially claim substantial refunds, boosting their liquidity.
Enhanced Margins & Reinvestment:
The elimination of the 18% GST on commissions will directly improve the financial margins for education consultants. This newfound financial strength can be reinvested into business expansion, technology upgrades, student support services, and global outreach, ultimately benefiting Indian students.
Setting a Powerful Precedent:
Beyond foreign education consulting, this decision sets a crucial precedent for other Indian service providers exporting various services to foreign entities. It strengthens the argument against a broad application of the “intermediary services” definition, particularly when the true recipient of the service is located abroad.
Boost to “Make in India” for Services:
By clarifying the tax position, India reinforces its commitment to promoting the export of services, aligning with global best practices and encouraging more international engagements for Indian businesses.
Conclusion: A New Era for Indian Study Abroad Consultants
The Supreme Court’s dismissal of the GST department’s appeal marks a pivotal moment. It not only provides definitive tax clarity for the overseas education consulting industry but also champions the “export of services” principle crucial for India’s service-led economy. This judgment empowers consultants, strengthens their financial viability, and ultimately paves the way for a more robust and globally competitive era for Indian study abroad recruiters. It’s a clear signal that India is open for business, ready to facilitate international education without undue tax burdens on its service exporters.