GST CIR NO.78/52/2018 DATE 31/12/2018
Clarificationon export of servicesunder GST - Reg.
Representations have been received seeking clarification on certain issues relating to export of services under the GST laws. The same have been examined and the clarifications on the same are as below:
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Sl. No. |
Issue |
Clarification |
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1. |
In case an exporter of services outsources a portion of theservices contract to another person located outside India, what would be the tax treatment of the said portionof the contractat the hands of the exporter? There may be instances where the fullconsideration for the outsourced services is not received by the exporterin India. |
1. Wherean exporter of services located in India is supplying certain services to a recipient located outside India, either wholly or partly through any other supplier of services located outside India, the following two supplies are taking place:-
(i) Supply of services from the exporter of services located in India to the recipient of services located outside India for the full contract value;
(ii)Import of services by the exporter of services located in India from the supplier of services located outside India with respect to the outsourced portion of the contract.
Thus, the total value of services as agreed to in the contract between the exporter of services located in India and the recipient of services located outside India will be considered as exportof servicesif all the conditions laid down in section 2(6) ofthe Integrated Goods and Services Tax Act, 2017 (IGST Act for short)read with section 13(2) of the IGST Act are satisfied.
2. It is clarified that the supplier of services located in India would be liable to pay integrated tax on reverse charge basis onthe import of services on that portion of services which has been provided by the supplier located outside India to the recipient of services located outside India. Furthermore, the said supplier of services located in India would be eligible for taking input tax credit of the integrated tax so paid.
3. Thus, evenifthe full consideration for the services as per the contract value is not received in convertible foreign exchange in Indiadue to the fact that the recipient of services located outside Indiahas directly paid to the supplier of services located outside India(for the outsourced part of the services), that portion of the consideration shall alsobe treated as receipt of consideration for export of servicesin termsof section 2(6)(iv) of the IGST Act, provided the:
(i)integrated tax has been paid by the supplier located in India for import of services on that portion of the services which has been directly provided by the supplier located outside India to the recipient of services located outside India; and
(ii)RBI by general instruction or by specific approval has allowed that a part of the consideration for such exports can be retained outside India.
Illustration: ABC Ltd. India has received an order for supply of services amounting to $5,00,000/-to a US based client. ABC Ltd. Indiais unable to supply the entire services from India and asks XYZLtd.Mexico(who is not merely an establishment of a distinct person viz. ABC Ltd. India, in accordance with the Explanation 1 in Section 8 of the IGST Act)to supply a part of the services (say 40% of the total contractvalue). ABC Ltd.India shall be the exporter of services for the entire value if the invoice for the entire amount is raised by ABC Ltd.India. The services provided by XYZLtd.Mexicoto the US based client shall be import of services by ABC Ltd.Indiaand itwould be liable to pay integrated tax on the same under reverse charge and alsobeeligible to take input tax credit of the integrated tax so paid. Further, if the provisions contained in section 2(6) of the IGST Act are not fulfilledwith respect to therealization of convertible foreign exchange, say only 60% of the consideration is received in India and the remainingamountis directly paid by the US based client to XYZLtd. Mexico, even in such a scenario,100% of the total contract value shall be takenas consideration forthe exportof services by ABC Ltd. Indiaprovided integrated taxon import of services has been paid on the part of the services provided by XYZLtdMexicodirectly to the US based clientand RBI (by general instruction or by specific approval) has allowed that a part of the consideration for such exports can be retained outside India.In other words,in such cases,the export benefit will beavailableforthe total realization of convertible foreign exchangeby ABC Ltd.India and XYZ Ltd.Mexico. |
2. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
3. Difficulty if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.
(Upender Gupta)
Commissioner (GST)
F. No. CBEC-20/16/04/2018-GST
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