Indian company's administrative services to foreign group company qualify as zero-rated GST export despite related party relationship

The AAR, Maharashtra ruled that administrative and support services provided by an Indian company to its foreign group company constitute zero-rated supply under GST. The Authority determined that despite being group companies, both entities are independent with different management and shareholding patterns, satisfying export of services criteria under IGST Act Section 2(6). The services were classified as non-intermediary since the relationship was between independent contractors, not principal-agent. With the supplier located in India, recipient in Abu Dhabi, payment in foreign exchange, and place of supply being outside India, the transaction qualified as export of taxable services eligible for zero-rated treatment.

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Issues Involved:
1. Whether the transaction in question is a Zero Rated Supply or a Normal Supply under the GST ActRs.
2. If the said supply is a Zero Rated Supply, then can the same be considered as an export of service under the GST ActRs.

Issue-wise Detailed Analysis:

1. Whether the transaction in question is a Zero Rated Supply or a Normal Supply under the GST ActRs.

The applicant, NES Global Specialist Engineering Services Private Limited (NES India), provides support services to NES Global Talent Recruitment Services (NES Abu Dhabi) under a Master Services Agreement (MSA). The services include accounting, invoicing, payroll assistance, and other administrative functions. The applicant charges NES Abu Dhabi the cost incurred in India with a margin of 10% plus applicable taxes.

The Authority for Advance Ruling (AAR) examined whether these services qualify as an export of service under Section 2(6) of the IGST Act, which defines "Export of Services" as:
- 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 in convertible foreign exchange.
- The supplier and the recipient are not merely establishments of a distinct person.

The AAR found that NES India is located in India, NES Abu Dhabi is located outside India, and the payment is received in convertible foreign exchange. The shareholding patterns and management personnel of both companies indicate that they are independent entities, not merely establishments of a distinct person. Therefore, the transaction meets the conditions for export of services.

2. If the said supply is a Zero Rated Supply, then can the same be considered as an export of service under the GST ActRs.

Section 16 of the IGST Act defines "zero rated supply" to include the export of goods or services. Since the transaction qualifies as an export of service under Section 2(6) of the IGST Act, it is also considered a zero rated supply.

The AAR referred to Section 13 of the IGST Act to determine the place of supply. According to Section 13(2), the place of supply of services, except those specified in sub-sections (3) to (13), shall be the location of the recipient. Since NES Abu Dhabi is located outside India, the place of supply is outside India, fulfilling the third condition of export of services.

The AAR concluded that the services provided by NES India to NES Abu Dhabi qualify as an export of services and are thus zero rated supplies under the GST Act.

Order:

The AAR ruled that the transaction between NES India and NES Abu Dhabi is a zero rated supply and qualifies as an export of service under the GST Act. The questions were answered as follows:
- The transaction is a Zero Rated Supply.
- The supply can be considered an export of service under the GST Act.

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