Realization of Export service proceeds in INR

[gururaj Bhat]

Dear Sir/Madam,

I hope you are well and keeping safe.

Case : A company is into 100% export of services to USA, but they are receiving the proceeds in INR. Banker is providing MT 103 form as proof of foreign inward remittance.

My Query :

1. To constitute the definition of export - should the export proceeds to be received in foreign currency or INR?

2. As the export received in INR in this case are we liable to pay GST @ 18 % ?

3. Whether MT 103 can be used as FIRC for GST refunds on accumulated ITC.

Looking forward for your valuable suggestions

Thanks & Regards,

Gururaj

[KASTURI SETHI]

1. It is not mandatory. Go through C.B.I. & C. Circular No. 88/07/2019-GST, dated 1-2-2019.

2. No.

3. Should be accepted.

[gururaj Bhat]

Sir, thank you for your valuable suggestion.

Sir in this case the amount is not transferred through vostro account. The customer is converting USD to INR and transferring the same to Indian Account. Please suggest.

[KASTURI SETHI]

As per Board's circular, export proceeds are required to be received through Vostro Account.

[gururaj Bhat]

Thank you sir for clarification.

[Rajagopalan Ranganathan]

Sir,

Proceeds of export is to be received in convertible foreign currency or in Indian Rupee where ever permitted by RBI according to FEMA. No gst is payable on such income.

[YAGAY andSUN]

FIRC cannot be used for getting GST refunds. You need to get the FIRC converted into BRC.

[KASTURI SETHI]

• The querist may also read the following :-

• Rule 89(2)(c) of CGST Rules, 2017 as amended.

• c) a statement containing the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of the export of services.

• Circular No. 125/44/2019-GST, dated 18-11-2019
•  
• 48. It is clarified that the realization of consideration in convertible foreign exchange, or in Indian rupees wherever permitted by Reserve Bank of India, is one of the conditions for export of services. In case of export of goods, realization of consideration is not a pre-condition. In rule 89(2) of the CGST Rules, a statement containing the number and date of invoices and the relevant Bank Realization Certificates (BRC) or Foreign Inward Remittance Certificates (FIRC) is required in case of export of services whereas, in case of export of goods, a statement containing the number and date of shipping bills or bills of export and the number and the date of the relevant export invoices is required to be submitted along with the claim for refund. It is therefore clarified that insistence on proof of realization of export proceeds for processing of refund claims related to export of goods has not been envisaged in the law and should not be insisted upon.

[gururaj Bhat]

Thank you sir, for further clarifications.

[Sagar Pomal]

As it is via Vostro account, will FIRC be applicable? What other documents we can request from bank to have it as a proof of export of services?

Also, one of our foreign client is paying via TransferWise, which does the transfer from their INR account in India and it is not a Vostro account. Is there anything we can do to show it as export?

Thank you

AI Summary

Export proceeds realization must be in foreign exchange or RBI permitted INR; refunds require BRC or FIRC proof. Realization of export of services must occur in convertible foreign exchange or in INR where RBI permits; this determines refund entitlement and GST treatment. For refund claims under Rule 89(2)(c), exporters must submit invoice details along with the relevant Bank Realization Certificate or Foreign Inward Remittance Certificate. Guidance notes emphasize realization through a vostro account as normative, while banks' MT 103 forms may be used operationally but BRC/FIRC remain the prescribed documentary proof for processing export-related refunds.