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Export of Services under GST in India


An export of services arises when a person supplies services to a person belonging to a location or country which is not India, and the remittance of pay for which is obtained in terms of convertible foreign exchange or Indian rupees wherever permitted by RBI (Reserve Bank of India). But every sale of service to a person situated outside India cannot be termed as an export of service.

Referring to Section 2(6) of the GST Act, export of service can be understood as:

A supply of any service when —
(i) the supplier (provider) of service is located in India;
(ii) the recipient of the facility or the service is situated outside India;
(iii) the location of sale or providing of service is outside India;
(iv) the providing of such facility has been obtained by the seller of service in convertible foreign exchange or Indian rupees wherever allowed by the Reserve Bank of India; and
(v) the transaction is taking place between separate entities and these are not merely two establishments of an entity (same entity).

Hence, we can say that as per the sections of the GST Act, for a sale of a facility or service to be an export of service under GST, the location of supply, the receiver of sale should be outside India while the supplier or distributor should be in the country (India). The remittance for such services or facilities provided need not necessarily be received only in convertible foreign exchange but can also be received in Indian rupees and should be permitted by RBI.

For example, Miss. Aisha, who is located in India, provides certain services to Mr. John in the USA. The remittance for the same was done by Mr John to Miss. Aisha is in convertible FOREX. Here, the following shall be noted:

  • The location of the supplier, Miss. Aisha is in India,
  • The location of the recipient, Mr. John, is in the USA,
  • And the place of supply is the USA,
  • The remittance of the amount in convertible FOREX,
  • And Miss. Aisha and Mr. John are two separate entities which now with all the conditions becoming true qualifies as export of service under GST.

Establishments of Distinct Persons

Two establishments shall be considered as separate persons if;

  1. The location of one establishment is in India, while the location of another establishment is outside India,
  2. The location of one establishment is in a State or UT, while the location of another establishment is outside that State or UT,
  3. The location of one organization is in one state/UT, while the place of another organization is in other places of business independently listed in that state/UT.

Treatment of Export under GST

Under the GST Act, export of services is treated as the following:

  • An inter-state supply shall be covered under section 7(5) of the IGST Act, and IGST, which is Integrated Goods and Services Tax, shall be applied on such export of services.
  • Zero-rated supply shall be coming under section 16(1) of the IGST Act, where the supply of service is made to SEZ or Special Economic Zone Unit/Developer (it will be treated as inter-state supply). A zero-rated supply is an exempted supply, but the ITC of any tax paid shall be made available on such supply, and a refund shall also be claimed (if any).

Receipt of Payments for Exports

The invoices pertaining to the export of services shall be denominated in foreign currency or INR, but in most cases, the proceeds from such export of services will be realized in freely convertible currency. The supplier of service can obtain export proceeds against the specific exports in INR funds if obtained through a convertible VOSTRO Account of a non-resident bank in a country apart from Nepal or Bhutan or a member of the Asian Currency Union.

A VOSTRO Account is an account which is held by a bank belonging to a foreign country with a domestic bank in the domestic currency. If an assessee is receiving consideration from overseas with regard to an export of service and has a Foreign Inward Remittance Certificate, which is issued by the recipient bank in India reflecting the currency remittance in INR, then such remittance can be treated as the foreign exchange receipt according to the circular provided by RBI, provided the same should be received through a freely convertible VOSTRO account of a non-resident bank located in any country or the country were supply of services was made by the supplier.

So, it is always recommended that for ease of being qualified as an export of service, the exporter is advised to obtain the consideration for any export of service in convertible foreign currency or a currency other than INR.

Methods for Exporting of Services under GST

Export of services under GST can be done in two ways:

Export of Services through Bond or LUT, without paying GST:

The taxable persons who are exporting services should file a Letter of Undertaking (LUT) or an export bond for exporting services without the payment of GST. This is considered to be beneficial as it would save time included in claiming and receiving the refund of tax paid under the GST Act and also eliminate any blocking of funds through the payment of GST.

LUT shall be valid for 1 financial year and can be applied for by an exporter of services by furnishing their GST Registration and that the taxable person has not been prosecuted for evading tax of over INR 2.5 crore or for any other offence coming below the CGST Act, IGST Act or any other law.

In case the exporter does not satisfy the above said conditions then if the exporter wants to export without paying GST, then the exporter should do the same by producing a bond on a non-judicial stamp paper which covers the tax liability on the export. And this shall be submitted along with a bank guarantee (not exceeding 15% of the bond amount). A bond does not have any fixed validity as was stated for LUT.

Export of Services by paying GST:

The exporter shall pay GST on such supplies made by them to a recipient located outside India with the place of supply also outside India. Then the same can be claimed as refund by the exporter of the service, for which the exporter should file a separate refund application in RFD-01.
The process for the same shall be as follows:

  • Login to the GST Portal;
  • Choose Facility or Services – Refunds – Request for Refund – Export of Services with tax remittance – RFD-01;
  • The exporter should then fill and file all the details of the export of services using an offline utility;
  • Provide the details of the tax amount to be refunded by the GST Authority, along with the proper bank details to which the refund should be credited;
  • On successful filing of the same, an ARN will be automatically generated using which the status of refund application can be tracked.

Documents required by Exporter for receiving GST Refund

Documents which are required by the Exporter of Services to be filed mandatorily for receiving the GST refund include the following:

  1. A covering Letter
  2. Bank Realization Certificates or Foreign Inward Remittance Certificates

iii. Export Invoices

  1. Form GSTR 3B and GSTR 1
  2. Request for Refund in the Form GST RFD 01
  3. A cheque which is cancelled

vii. If GST claims of refund is exceeding or is over an amount of INR 2 lakhs per quarter, certificate from Chartered Accountant or Cost Accountant.

Relevant Dates for Exporter of Service for Applying for Refund

In the case of exporters of facility or service, the important date is either:

  1. The date of conclusion of services, or
  2. The date on which advance in received, in cases where, the advance has been received prior to the date on which the invoice was provided or issued.

therefore, if an exporter of the facility or the service receives an advance, it is beneficial for him to apply for a refund at that stage. In case of any delay in receipt of a refund, then;

  1. Cases beyond sixty days will get interest at the notified rate not exceeding 6% till the date of refund, provided the refund has been sanctioned by the concerned authority;
  2. Cases which may be adjudicated by Appellate or Adjudicating authority interest shall be paid at the notified rates not exceeding 9% till the date of refund.

So, it is to be noted that in case of the export of services, the exporter should take care of all the applicable provisions of the GST Act and comply with the same so as to either avoid payment of GST while exporting such service or receive a timely refund of any ITC or funds which are blocked in the same. Understanding the applicable law and its provisions would be a good choice before getting yourself committed to any kind of service or supply which is taxable.

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