GST export of services

[Madhavan iyengar]

Under export of service rules it is mentioned that it wont qualify as export if:

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;”

meaning of above ie if indian company exports to its related unit in foreign country then the unit in foreign country should not be a mere branch it should be a registered entity in the foreign country ie in America the word INC is used in germany Gmbh is used which signifies that they are separate regd entities in foreign countries so that benefit of export is not denied

Experts please clarify on this issue.

[DR.MARIAPPAN GOVINDARAJAN]

You mean - Explanation 1 in Section 8 - IGST Act?

[KASTURI SETHI]

Acronyms namely, 'INC' and ' GMBH' would not suffice to prove the distinct legal entity for the purpose of claiming export benefits.The department would not accept such acronyms for export benefits. This is my observation.

[Madhavan iyengar]

Kasturi sir

In this case every export of services to a related person abroad would be questionable.

or the benefit of export is denied where invoicing is done to a branch or liason office abroad which has no legal existence ie not regd as a company / firm in the overseas country

In foreign countries they have their own mechanism to determine the nature of legal entity in america INC would signify that the company is a incorporated entity. akin to india where we say pvt ltd/ ltd co / LLP etc

What is the intention of law is it that exports of services have to be made only to other than related parties.

[KASTURI SETHI]

Dear Sir,

You need the shelter of case law otherwise the Department may not allow. Case law which has been accepted by the Department. Risk is involved. The Department is very serious in allowing such benefits. You may win in CESTAT.

[KASTURI SETHI]

Taxability - Interpretation of taxing statute imposing tax liability on assessee - Burden to prove tax liability of an assessee is on Revenue - In case of any ambiguity in a taxing statute imposing tax liability on the assessee, benefit of doubt to be given to assessee. [para 43]

2018 (361) E.L.T. 577 (S.C.) = 2018 (7) TMI 1826 - SUPREME COURT COMMISSIONER OF CUS. (IMPORT), MUMBAI Vs. DILIP KUMAR & COMPANY

[KASTURI SETHI]

The department can ask for any document from the exporter to establish distinct legal entity as the burden of proof is cast upon the person who wants to avail exemption as per judgement of the Supreme Court.

AI Summary

Export of services: entitlement depends on recipient being a distinct legal person, not a mere branch or office. Entitlement to export of services depends on the recipient being a distinct legal person rather than a mere branch or liaison office; corporate suffixes alone do not prove distinctness. The tax authority may demand documentary proof of the recipient's independent registration, and the exporter bears the burden of establishing eligibility for export treatment, though ambiguity in taxing statutes can confer benefit of doubt to the assessee.