Query on Export of Services & ITC Refund - Guidance Required

[Tushar Malik]

Our client is a Delhi-based subsidiary of a foreign company. The Indian subsidiary provides IT and support services to its parent company located outside India.

For the last 3 years, the services were treated as taxable domestic supplies, and GST was paid after availing ITC.

From FY 2025-26, the company intends to treat these as Export of Services, since all conditions under Section 2(6) of the IGST Act are fulfilled, and plans to claim refund of unutilized ITC under Section 54(3) read with Rule 89(4).

Queries:

1. Whether the unutilized accumulated ITC of the previous financial year can be claimed as refund now?

2. Whether ITC paid under RCM on services imported from the same foreign parent can also be included in the refund claim?

3. What is the time limit and frequency (monthly/quarterly) for filing refund claims in case of export of services under LUT?

Any practical guidance or case references from senior professionals will be appreciated.

[Sadanand Bulbule]

Query No.1

Answer:

The ITC accumalated due to  domestic taxable supplies cannot be claimed  as refund by simply reclassifying past supplies as exports.

Query No.2

Answer:

Yes. ITC of IGST  paid under RCM on imported services is eligible for refund on compliance of conditions under Rule 36 and Section 17(5).

Query No.3

Answer:

Under Section 54(1), time limit is two years from the relevant date defined under Explanation 2(6).

[Tushar Malik]

Thank you for your valuable response and clarification.

[Sadanand Bulbule]

For more details refer the following:

2025 (10) TMI 1123 - SC Order - Union Of India & Ors. Versus Patson Papers Private Limited.

Entitlement for refund of unutilized Input Tax Credit (ITC) qua Cess - zero-rated supplies - goods manufactured for export - Validity of Circular No.125/44/2019-GST-as well as para-5 of the Circular No. 45/19/2018-GST issued under Section 168 - challenged the show cause notice and the order of sanction of refund - it was held by High Court that "when the petitioner has paid the IGST under Section 16(3) of the IGST Act on the zero rated supply and refund is claimed by the payment of such IGST, the petitioner admittedly would not be able to utilize input tax credit of cess as cess is not payable on the zero rated supply. Therefore, proviso to Section 11(2) of the Act would not be applicable in the facts of the case and the petitioner would be entitled to refund of the unutilized input tax credit on cess paid on purchase of coal utilized for the purpose of manufacture of goods which are exported."

HELD THAT:- It is not deemed necessary to exercise jurisdiction under Article 136 of the Constitution of India - SLP dismissed.

No.- Special Leave Petition (Civil) Diary No(S). 49578/2025

Dated:- October 27, 2025

[Tushar Malik]

Grateful for your guidance and support on this matter.

[Shilpi Jain]

If you wish to claim refund of past ITC - you can do export with payment of tax and claim refund.

Why were the past transactions not export of service?

Frequency for filing is at your choice though ensure that it is filed within 2 years.

[Tushar Malik]

Thank you for your valuable response on this.

Actually, our company is providing business support or marketing services in India on behalf of a foreign company.

However, the payment for these services is being adjusted through local collections in India, and not received in foreign currency.

Hence, there was a lack of clarity on whether such transactions would qualify as ‘export of service’ since the payment is not coming from outside India.

AI Summary

Export of services: past domestic ITC cannot be refunded by reclassification; IGST under RCM refundable; two year limit. Accumulated ITC from past domestic taxable supplies cannot be refunded merely by reclassifying past supplies as exports. IGST paid under reverse charge on imported services is refundable subject to statutory conditions. Refund claims must be filed within two years from the relevant date. Alternatively, supplies may be made zero rated by paying IGST and then claiming refund of unutilized ITC; filing frequency (monthly or quarterly) may be chosen so long as claims fall within the two year limit. Consider whether export conditions, including receipt in convertible foreign exchange, are satisfied.