GST On Services Provided To Foreign Clients in India – Not
Export of Services: TSAAR Ruling
Introduction
In a notable Advance
Ruling, the Telangana State Authority for Advance Ruling (TSAAR) clarified the
GST treatment of inspection services provided by Indian entities to foreign
clients for goods located or manufactured in India. The ruling was issued in the
case of M/s. International Inspection Services Pvt. Ltd., which had
sought clarification on whether such services qualify as “export of services”
and are hence exempt from GST.
Ruling
Details
- Ruling Authority:
Telangana State Authority for Advance Ruling (TSAAR)
- Order No.:
33/2021
- Ruling Date:
29th December 2021
- Application No.:
A.R.Com/06/2020
- Applicant:
M/s. International Inspection Services Pvt. Ltd.
- Jurisdiction:
Kukatpally, Hyderabad, Telangana
- GSTIN:
36AACCI9665C1ZG
Brief Facts
of the Case
M/s. International
Inspection Services Pvt. Ltd. is engaged in providing inspection and
expediting services related to equipment and materials manufactured in
India and meant for export. The services are performed at Indian locations on
behalf of foreign clients who have no place of business in India. The
company receives payment in foreign currency.
The applicant sought an
Advance Ruling on whether their services qualify as export of services
under GST and if they are exempt from taxation.
Questions
Raised Before the Authority
1. Whether
services rendered in India for foreign companies (which have no place of
business in India) are considered exports of services under GST?
2. Whether
services provided in respect of goods being exported are also considered exports
of services?
Submissions
by the Applicant
- The applicant certifies the quality
and quantity of goods supplied by Indian suppliers to foreign buyers.
- The goods are meant for export,
and inspection is done in India on behalf of the foreign buyer.
- Since the services are provided to a
foreign client and payment is received in foreign currency, the applicant
believed that the supply should qualify as export of services under
GST.
Legal
Discussion and Findings by TSAAR
Key Legal Provision:
Section 13(3)(a) of the IGST Act, 2017
The Authority relied upon
Section 13 of the IGST Act, which deals with place of supply of
services when either the supplier or recipient is outside India.
Section 13(3)(a)
specifies:
“The place of supply of
services shall be the location where the services are actually performed, in
case of services supplied in respect of goods which are required to be made
physically available by the recipient to the supplier of services.”
Application
to the Present Case
- The recipient of services is outside
India, satisfying one condition for export.
- However, the services are
physically performed in India on goods located in India.
- As per Section 13(3)(a), the place
of supply in this case is India, because the inspection
services are performed in India.
- Therefore, it does not qualify as
“export of services” under GST, since one of the key conditions of
export — place of supply being outside India — is not fulfilled.
Final
Ruling by TSAAR
|
Question
|
Ruling
|
|
Whether
services rendered for foreign companies in India qualify as export?
|
No.
Place of supply is in India; hence GST is applicable and it is not treated
as export.
|
|
Whether
services provided for goods being exported are treated as export of services?
|
No.
As above, since services are performed in India, GST is applicable and
services are not exports.
|
Conclusion
This ruling by TSAAR
settles an important aspect of place of supply rules for services under
GST. Despite receiving foreign currency and servicing foreign clients,
inspection services performed physically in India do not qualify as
exports if the services relate to goods located in India.
Hence, businesses engaged
in similar service models should charge applicable CGST and SGST and not
treat such supplies as zero-rated exports, unless the place of supply
shifts outside India as per the provisions of the IGST Act.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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