Clarification on export of services under GST - GST - States - CCTs Ref.in CCW/GST/74/2015 - 03/2019 GST

Government of Andhra Pradesh Commercial Taxes Department Proceedings of the Chief Commissioner of State Tax (FAC) Present: Dr P.Lakshmi Narasimham, I.A.S. ------------------------------------------------------------------------------------------------------------- Circular No. 03/2019 GST CCTs Ref.in CCW/GST/74/2015 Dt.24.01.2019 Sub: Clarification on export of services under 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: SL.No ISSUE Clarification 1. In case of exporter of services outsources a portion of the services contract to another person located outside India. What would be the tax treatment of the said portion of the contract at the hands of the exporter? There may be instances where the full consideration for the outsourced services is not received by the exporter in India. 1. Where an 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 outside India will be considered as export of services if all the conditions laid down in section 2(6) of the 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 on the 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, even if the full consideration for the services as per the contract value is not received in convertible foreign exchange in India due to the fact that the recipient of services located outside India has directly paid to the supplier of services located outside India (for the outsourced part of the services), that portion of the consideration shall also be treated as receipt of consideration for export of services in terms of section 2(6)(iv) of 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 receipt of services located outside India; and (ii) RBI by general instructions or by specific approval has allowed that a part of the consideration for such exports can be retained outside India. Illustration: ABC Limited, India has received an order for supply of services amounting to $ 5, 00,000/- to a U.S based client. ABC Limited, India is unable to supply the entire services from India and asks XYZ limited, Mexico (who is not merely an establishment of a distinct person viz. ABC limited, 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 contract value). ABC limited India shall be the exporter of services for the entire value if the invoice for the entire amount is raised by ABC Limited, India. The services provided by XYZ Limited, Mexico to the U.S based client shall be import of services by ABC limited, India and it would be liable to pay integrated tax on the same under reverse charge and also be eligible to take input tax credit of the integrated tax so paid. Further, if provisions contained in section2(6) of the IGST Act are not fulfilled with respect to the realization of convertible foreign exchange, say only 60% of the consideration is received in India and the remaining amount is directly paid by the U.S based client to XYZ limited, Mexico, even in such a scenario, 100% of the total contract value shall be taken as consideration for the export of services by ABC Limited, India provided integrated tax on import of services has been paid on the part of the services provided by XYZ limited. Mexico directly to the U.S based client and 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 be available for the total realization of convertible foreign exchange by ABC Limited and XYZ limited, Mexico. The field officers are requested to publicize the contents of this Circular. Chief Commissioner (ST) FAC