Export of Service

[Kaustubh Karandikar]

A (India) is subcontractor for B (USA) and provides software implementation/development services to C (India). A bills B and B bills C(India). Staff from A carry out services either in their offices or in C’s office. Staff of A are deputed on projects being executed by A’s subsidiary in the US. The staff spend 5-10% of their time in US and rest is done from India. Is this export of service? Does it become back office support services and therefore covered by the AAR ruling and liable to GST?

[Spudarjunan S]

Dear Sir,

While examining the place of supply for these transactions the documentation (i.e. agreement) between A & B plays a major role.

Kindly analyse whether A is acting as an agent of B while provided services to C if so then the transaction falls under section 13(8) of IGST Act - "Location of supplier" i.e. Intermediary services where it will not be considered as export of services as the place of supply would fall within India.

However, if A is providing the services in his own capacity to C as per the instruction of B which is iterated in the agreement, then the same will fall under section 13(2)IGST Act subject to section 13(3) of IGST Act - "Location of the recipient" which is outside India and the transaction may qualify for export of services subject other conditions u/s 2(6) of IGST Act.

[Mahadev R]

If the services are being provided in relation to software (service), then the place of supply would be location of the recipient subject to fullfillment of other condtions in Section 2 (6) of IGST Act.

The Maharashtra AAR has different facts (which still may not hold good) and may not be applicable for this scenario when A is providing main service and not acting as agent.

AI Summary

Export of services: agency vs principal characterization determines place of supply and export treatment under IGST. Qualification as export of services depends on whether the Indian supplier is an intermediary (agent) - in which case section 13(8) IGST Act locates supply in India and export treatment is precluded - or the supplier acts in its own capacity, in which case section 13(2) read with section 13(3) and the conditions in section 2(6) IGST Act determine place of supply and potential export status. For software services, place of supply is normally the location of the recipient if export conditions are met.