Place of provision of services

[Madhavan iyengar]

A Company in India has received order to develop a proto type from a foreign vendor

The Indian Company uses its own material and develops the prototype at its plant in india.

Foreign vendor agrees to compensate for eng services work done on prototype by indian company

Indian company raises invoice for engineering services on Foreign vendor in USD

Can the Invoice raised for engineering services qualify as export of services ( since all conditions will be satisfied ) whether there can be any issue on POPS

[Prudhvi Jakkula]

To treat a transaction as export of service the following conditions must be satisfied.

(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;

I am assuming that the 4th and 5th conditions are satisfied because you did not mention about those details in your question.

Here the important thing is place of supply. In the above case the place of supply is outside India. There fore the above transaction is export of service.

[Madhavan iyengar]

madam

thanks i did not mention the other conditions because i have already mentioned in my query taht all conditions are satisfied except place of provision and my query is only with respect to Place of provision as this is the key in export of services kindly examine from POPS angle

[Prudhvi Jakkula]

Sir,

For your transaction, place of the supply is the location of recipient and therefore it is and export.

[KASTURI SETHI]

It is not litigation-free. Services have been actually performed in India.

[Madhavan iyengar]

kasturi sir

thats the view i wanted from the expert this is not to belittle the other reply given but we should look at facts and give the direction of law since this is a indirect tax and the assessee has to pay thru the nose when the interpretation of law is otherwise and will result in litigation and costs when these are known at time of transaction itself it would be better thats why this forum is amazing and does not toe the line of the revenue nor taxable person but the interepretation based on the gst law with implications

[Madhavan iyengar]

kasturi sir

cant we take stand that gst being destination based tax ie

to whom the indian person is providing service it is recipient located abroad in non taxable territory ie the service will be performed in india no doubt but after performance of service indian company will send its report to the foreign company and this report is the service which is being consumed by the foreign party and since it is destination based tax in case destination is abroad should it not be tax free and accordingly treated as export.

in software also similar issues take place only difference is the software services are not performed on any goods but all work is done in india and then sent by mail etc for consumption abroad. kindly revert

[KASTURI SETHI]

Dear Sir,

The assessees come to the experts when law is not crystal clear and there is an interpretational dispute. I have expressed what stand is most likely to be taken by the department to safeguard the revenue. In this situation, no doubt, ultimately the goods in respect of which engineering service is to be provided are likely to be exported. At the same time, the possibility of not exporting the said goods cannot be ruled out. At present, the place of supply of services is in question and not place of supply of goods. We cannot integrate both (place of supply of services and place of supply of goods). We should talk about the present position. What is status of services or goods today ? What is the status of GST law today ?This service will be performed in India on the direction of a foreign party. There are so many factors and facts which the parties may not disclose to us but the department is well aware and visionary. We should not forget it.

Our duty is to make the querists/clients aware about all aspects.

Thanks & regards

[KASTURI SETHI]

Dear Sir,

Pl.refer to your query at serial no.6 dated 23.6.19 above. Logically and practically your arguments are full of substance. Lawfully, the issue is debatable. The department goes by the language of the Act. Wait for other experts' views.

[KASTURI SETHI]

Pl. also go through this decision of AAR, Maharashtra:-

2019 (7) TMI (43) Applicant : Bill Care Ltd.

AI Summary

Place of supply of services determines export treatment: recipient-location may permit zero rating despite performance in India. Export classification depends on satisfying export conditions, notably that the place of supply is outside India. If supplier and recipient locations, foreign exchange receipt, and independence of establishments are met, statutory place-of-supply rules point to export treatment; however, the fact that services are physically performed in India creates a revenue risk and makes the issue fact-sensitive and debatable, warranting reliance on authoritative rulings.