Export of Service under GST (Conditions)

[Sahil Shah]

Hello Experts,

If a person residing in India charges Consultancy Fees (in USD) from a company in USA, in which he is a director, is it considered to be export of service? There is no employment agreement with such company but there is a consultancy agreement.

I want to know this, so as to decide whether to take benefit of zero rated supply.

Definition u/s 2(6) of IGST act has 5 condition for export of service, one of the 5 conditions is -
"the supplier and recipient of service should not be merely establishments of a distinct person"

Kindly reply considering this condition as other 4 conditions given u/s 2(6) are satisfied by me.
Thank you!

[Shilpi Jain]

It would be a zero rated supply i.e. export of service. The director and the company would be distinct persons

[KASTURI SETHI]

"the supplier and recipient of service should not be merely establishments of a distinct person"

The above condition has been carried forward in GST as it existed in pre-GST era (Service Tax law ). So the following case law can help you.

2020 (8) TMI 181 - GUJARAT HIGH COURT LINDE ENGINEERING INDIA PVT. LTD. VERSUS UNION OF INDIA

This judgement is based on the decision of Supreme Court.

[KASTURI SETHI]

Also go through this case law.

L & T Sargent & Lundy Ltd. Vs. CCE 2021 (11) TMI 69 - CESTAT AHMEDABAD

[Sahil Shah]

Thank you so much for your valuable inputs Shilpa Mam & Kasturi Sir !

[Amit Agrawal]

Please also see Circular No. 161/17/2021-GST (under F. No. CBIC-20001/8/2021–GST) dated 20.09.2021.

AI Summary

Export of service: Director's consultancy to company qualifies as zero rated supply where supplier and recipient are distinct.
A consultancy supply by a director to the overseas company where he serves, effected under a consultancy agreement and not employment, can qualify as export of service and be zero rated because the supplier and recipient are regarded as distinct persons; this position is supported by relevant case law and administrative circular guidance, subject to fulfilment of the other statutory export conditions and documentation requirements.