Table of Contents
Export is considered as a service offered by a sister concern, subsidiary or group concern located in India to a foreign company located outside India.
- There are major benefits to "exporting" goods or services. To constitute a transaction as "Export," however, a set of conditions must be fulfilled. Similarly, Section 2(6) of the IGST Act, 2017 incorporates five conditions that must be met in order for a supply of service to be classified as "Export of service." Unfortunately, one of the conditions listed in clause (v) of Section 2(6) of the IGST Act is always unclear.
- In the 45th GST Council meeting, the GST Council recommended that the CBIC offer necessary clarifications regarding the condition of Section 2(6)(v) of the IGST Act, 2017. The CBIC provided clarification on section 2(6)(v) of the IGST Act 2017's export of services condition. {GST dated 20th Sept, 2021 - Circular Number. 161/17/2021}
Clarification provided by Central Board of Indirect Taxes and Customs.
Now CBIC vide Circular No. 161/17/2021-GST dt. 20.09.2021 has reiterated the aforesaid views. It explain as here under:
- it is clarified that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under Companies Act, are separate persons under CGST Act, and thus are separate legal entities.
- Accordingly, these two separate persons would not be considered as “merely establishments of a distinct person in accordance with Explanation 1 in section 8”.”
- Under the CGST Act, a company incorporated in India and a body corporate incorporated outside India, referred to as a foreign company under the Companies Act, are separate persons and thus legal entities;
- these two separate persons would not be considered "merely establishments of a distinct person in accordance with Explanation 1 in section 8."
- A supply of services by a subsidiary/ sister concern/ group concern, etc., incorporated in India, to the establishments of a foreign company located and incorporated outside India, would not be barred by the condition Section 2(6)(v) of the IGST Act 2017 for qualifying as an export of services, because such supply is not considered as a supply between merely establishments of distinct persons under section 8 Explanation 1 of the IGST Act 2017.
- So, A supply from an Indian company to its related establishments outside India, which are incorporated under the laws of another country, is not classified as a supply to purely establishments of distinct persons under Section 8 Explanation 1 of the IGST Act 2017.
- Under section 8 Explanation 1 of the IGST Act 2017, a supply from a company incorporated in India to its connected establishments outside India, which are incorporated under the laws of the nation, would not be classified as a supply to merely establishments of distinct person.
- As a result, services supplied by an Indian subsidiary, sister concern, group concern, or other entity to a foreign company located outside India would qualify as 'export of services,' subject to the other conditions of Section 2(6) of the IGST Act being fulfilled.
