Export of Services payments not received in foreign currency - Refund eligibility

[Krishnamurthy V]

Sir,

For export of services, one of the conditions stipulate that payments are to be received in convertible foreign currency. Suppose, export of services done through online, payments are received through Paypal, deposited in servie providers' Bank account in Indian currency, whether ITC refund can be claimed in this case. Please advice.

[KASTURI SETHI]

Pl go through C.B.I. & C. Circular No. 88/07/2019-GST, dated 1-2-2019. It will be helpful to you.

[Rajagopalan Ranganathan]

Sir,

According to para 3.2 of CBIC circular No. 88/07/2019-GST dated 01.02.2019, “there is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), 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. 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”. Further, attention is invited to the amendment to section 2(6) of the IGST Act, 2017 which allows realization of export proceeds of services in INR, wherever allowed by the RBI.

Therefore, even when you receive the payment in Indian rupee you can claim ITC refund subject to approval given by RBI.

[KASTURI SETHI]

Comprehensive reply by Sh.Ranganathan, Sir. Thanks for incorporating statutory force.

[Krishnamurthy V]

I thank Shri Kasturi Sir and Shri Rajagopalan Ranganathan sir.

AI Summary

Can ITC refunds be claimed for exported services paid in INR via PayPal? CBIC Circular No. 88/07/2019-GST clarifies. A query was raised regarding the eligibility for claiming an Input Tax Credit (ITC) refund when payments for exported services are received in Indian currency through platforms like PayPal. The discussion referenced CBIC Circular No. 88/07/2019-GST, which clarifies that while export invoices can be in Indian Rupees, export proceeds must typically be realized in freely convertible currency. However, payments in INR are permissible under certain conditions, such as through a freely convertible Vostro account, and subject to RBI approval. The discussion concluded that ITC refund claims are possible under these circumstances.