Legal Opinion on Classification of Services as Export under GST
I. Facts of the Case
It is understood that the applicant, a company registered in India under the Goods and Services Tax (GST) regime, is engaged in the provision of various support services to its group company located in Australia, pursuant to a service agreement. The services rendered include (i) procurement support services, (ii) information technology (IT) support services, and (iii) accounts receivable support services. These services are provided by designated employees of the Indian company who are either working remotely from India (from home) or from the Indian office premises. The Australian group entity is the sole recipient of such services, and the consideration is charged on a cost-plus markup basis.
II. Legal Issue
The core issue for determination is whether the aforementioned services rendered by the Indian company to the Australian group entity qualify as “export of services” within the meaning of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 ("IGST Act"), and consequently, whether such services are to be treated as zero-rated supplies under Section 16 of the said Act.
III. Relevant Legal Provisions
Section 2(6) of the IGST Act defines "export of services" to mean a supply of any service that satisfies the following cumulative conditions:
- The supplier of service is located in India;
- The recipient of service is located outside India;
- The place of supply of service is outside India;
- The payment for such service has been received by the supplier in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and
- The supplier and recipient are not merely establishments of a distinct person in accordance with Explanation 1 to Section 8 of the IGST Act.
IV. Analysis of the Nature of Services and Place of Supply
In order to determine whether the condition prescribed under clause (iii) of Section 2(6), i.e., place of supply being outside India, is satisfied, reference is to be made to Section 13 of the IGST Act, which governs the determination of place of supply of services where either the supplier or the recipient is located outside India.
Section 13(2) lays down the default rule that, unless covered by sub-sections (3) to (13), the place of supply of services shall be the location of the recipient of services. A review of the nature of services in question indicates that:
- The procurement support services, involving assistance with purchase order processing and procurement practices, are provided remotely from India and do not fall under the categories specified in Sections 13(3) to 13(13) such as performance-based services, services in relation to immovable property, etc.
- The IT support services, rendered by personnel situated in India through electronic means, are similarly not performed at any specific location outside India and thus are not covered by any special rule in Sections 13(3) to 13(13).
- The accounts receivable services, which are back-office in nature and carried out from the Indian office, are also outside the scope of the specific sub-sections of Section 13.
Accordingly, all three services fall within the ambit of Section 13(2), and the place of supply shall be deemed to be the location of the recipient, i.e., Australia.
V. Satisfaction of Other Conditions under Section 2(6)
It is further submitted that:
- The supplier of the services, being the Indian entity, is located in India;
- The recipient, being the Australian group company, is a person located outside India;
- The consideration for the services is being received in convertible foreign exchange, or in Indian rupees as permitted by the RBI under relevant FEMA regulations;
- The Indian entity and the Australian group company are separate legal persons and not merely establishments of the same legal entity; therefore, the bar under Explanation 1 to Section 8 does not apply.
VI. Conclusion
In view of the foregoing analysis, it is submitted that the services rendered by the Indian company to the Australian group entity satisfy all five conditions prescribed under Section 2(6) of the IGST Act, 2017, and accordingly qualify as “export of services.” As such, the same shall be treated as zero-rated supplies in accordance with Section 16 of the IGST Act, 2017.
Consequently, the supplier is entitled to supply such services without payment of IGST under cover of a Letter of Undertaking (LUT) under Rule 96A of the CGST Rules, 2017, or alternatively, may opt to pay IGST and claim refund of the same.
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