in case of export of services, if the recipient of service is in india and payment made in INR, whether this would qualify as export service. I am of the view this will not

[janakiraman iyer]

in case of export of services, if the recipient of service is in india and payment made in INR, whether this would qualify as export service. I am of the view this will not

[So B]

The section 2(6) of the IGST Act defines the term " Export of Service:" which is as follows :

(6) “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;

Thus it is evident from above that receipt of convertible foreign exchange is essential.

[KASTURI SETHI]

In some instances, receipt of Indian currency is not bar to qualify export of service.

[Kishan Barai]

Few points to be noted while realising the payment in INR

(a) All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency.

(b) However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan. Additionally, rupee payment through Vostro account must be against payment in free foreign currency by buyer in his non- resident bank account. Free foreign exchange remitted by buyer to his nonresident bank (after deducting bank service charges) on account of this transaction would be taken as export realization under export promotion schemes of FTP.

(c) Contracts (for which payments are received through Asian Clearing Union (ACU) shall be denominated in ACU Dollar. However, participants in the ACU may settle their transactions in ACU Dollar or in ACU Euro as per RBI Notifications. Central Government may relax provisions of this paragraph in appropriate cases. Export contracts and invoices can be denominated in Indian rupees against EXIM Bank/Government of India line of credit.

AI Summary

Export of services: payment in convertible foreign exchange required to qualify, with limited Vostro and ACU exceptions. Export of services under the IGST framework requires the supplier to be in India, the recipient to be located outside India, the place of supply to be outside India, and payment to be received in convertible foreign exchange. Payments in Indian rupees to a recipient in India therefore do not meet the statutory export conditions, except in limited procedural cases such as receipts routed through specified freely convertible Vostro accounts, ACU denomination/settlement provisions, or invoicing tied to EXIM Bank/Government of India lines of credit.