Export of services

[THYAGARAJAN KALYANASUNDARAM]

Dear expert,

Modus operandi of our business

We are providing services to various customers located in US as staff recruitment services. And the billing is made only from US office to our customers. And the company having branch office located in India and reimbursed all expenses made in India with some profit from our US office against the invoice raised by Indian branch to US office. And we get all the payment only foreign convertible currency.

My query is

1.whether are we Exporter of service?

2. If yes do we have to execute the bond or LUT as the case may be?

3. Do we get the refund against the inputs used in the business in India?

4. So far we have shown as export of service under service tax regime.

5. So far we have not made transfer pricing. Is there any consequences under income tax act?

Please kindly elaborate me sir.

Thanks in advance.

[RAMESH PRAJAPATI]

As per section 2 (6) of IGST Act “export of services” means the supply of any service when, (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8 (as under).

Explanation 1.––For the purposes of this Act, where a person has,–– (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.

As stated above, services supplied by Indian office to US office of the same company is not export of service although Indian Branch raises invoice and collects payment in FE. It will be treated as interstate supply. IGST is payable. Valuation is to be done as per GST Valuation Rules. Transfer pricing also to be taken care properly.

[KASTURI SETHI]

Sh.Prajapati Ji, You have really done hard work. No doubt left. Agree with you in toto.

[THYAGARAJAN KALYANASUNDARAM]

Dear expert,

Thanks for your timely reply.

[THYAGARAJAN KALYANASUNDARAM]

Dear expert,

Even without adding any margin. That is actual expenses incurred by the Indian company reimbursed from foreign concern also is liable to pay IGST tax under GST regime.

[THYAGARAJAN KALYANASUNDARAM]

Dear Expert,

Since both the company got registered separately under the respective country act not as branch And as per the person definition my understanding should be two different person.

Kindly Clarify

Thanks in Advance

[RAMESH PRAJAPATI]

Are both companies are declared in the Balance Sheet as related party.

[THYAGARAJAN KALYANASUNDARAM]

Dear sir,

No sir.

AI Summary

Services to US Office Not Export Under IGST; Considered Interstate Supply, IGST Applies. Review Transfer Pricing, GST Valuation. A participant in a discussion forum inquires about the classification of their business activities under the Goods and Services Tax (GST) regime, specifically regarding whether their service provision to US clients constitutes an export of services. The Indian branch raises invoices to the US office, and payments are received in foreign currency. An expert clarifies that services provided by the Indian office to the US office of the same company do not qualify as an export of services under the IGST Act, as they are considered interstate supply, making IGST applicable. Transfer pricing and valuation under GST rules must also be addressed.