Tax implications of photography services between Indian and Israeli companies under GST law

The photography services provided by an Indian company to its parent company in Israel are subject to State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) as the services are performed in India. Despite meeting some criteria, the services do not qualify as zero-rated "export" supply under the Integrated Goods and Services Tax (IGST) Act, 2017, as they do not fulfill all conditions specified. Consequently, the supply is not zero-rated and is subject to SGST and CGST.

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Issues Involved:
1. Taxability of photography services under SGST, CGST, or IGST.
2. Determination of whether the supply of photography services qualifies as a zero-rated "export" supply under Section 2(23) r/w Section 2(6) of the IGST Act, 2017.

Detailed Analysis:

Issue 1: Taxability of Photography Services
The applicant, an Indian private limited company (Segoma India), provides photography services for diamonds to its parent company in Israel (Segoma Israel). These services are performed in India, where diamonds are physically made available to Segoma India by customers of R2Net, a US-based company. The applicant charges Segoma Israel for these services, and Segoma Israel pays in convertible foreign exchange.

The Authority for Advance Ruling (AAR) examined whether the supply of photography services is liable to SGST and CGST or IGST. According to Section 13(3)(a) of the IGST Act, the place of supply of services requiring goods to be physically available is where the services are performed. Since the photography services are performed in India, the place of supply is India. Therefore, the supply of photography services is subject to SGST and CGST.

Issue 2: Zero-rated "Export" Supply
To qualify as an export of services under Section 2(6) of the IGST Act, the following conditions must be met:
1. The supplier of service is located in India.
2. The recipient of service is located outside India.
3. The place of supply of service is outside India.
4. Payment for such service is received in convertible foreign exchange.
5. The supplier and recipient are not merely establishments of a distinct person as per Explanation 1 in Section 8 of the IGST Act.

The AAR confirmed that the supplier (Segoma India) is located in India and the recipient (Segoma Israel) is located outside India, satisfying conditions (i) and (ii). However, the AAR found that the place of supply of service is in India, as the photography services are performed in India, failing condition (iii). While the payment is received in convertible foreign exchange, satisfying condition (iv), the AAR determined that Segoma India and Segoma Israel are not distinct persons under Explanation 1 of Section 8, failing condition (v).

The AAR concluded that the supply does not qualify as an export of services, as it does not meet all the conditions under Section 2(6) of the IGST Act. Consequently, the supply is not zero-rated and is subject to SGST and CGST.

Order:
1. The supply of photography services is liable to SGST and CGST.
2. The supply does not qualify as a zero-rated "export" supply under Section 2(23) r/w Section 2(6) of the IGST Act, 2017.

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