Export of Services and Consideration Receipt under GST

In the world of business trade, the export of services plays a crucial role in the economic country. The Goods and services regime have the taxation structure for services exported from India with the significant transformation. The article will explore about the fundamentals of export of services in GST. Understand the exporting services and the association which is considered under the GST is imperative for businesses engaged in cross-border transactions.

History

The export of goods and services in GST law are zero-rated supplied. Government’s intention is to encourage exports from the country to get valuable foreign exchange and make sure that taxes are not sticking on exports. The concept of export services, there are conditions to be considered as export of services as per provision of Section 2(6) of the IGST Act, 2017. 

Export of services under GST means the supply of any services in case of:

• The recipient of service is located outside India: Satisfied;
• The service supplier is located in India: satisfied;
• The place of supply of service is outside India, when it is satisfied determined by section 13 and 13(2) of the IGST Act is outside India.
• Payment for such service has been received by the service supplier is convertible foreign exchange (in case of Indian Rupees, wherever allowed by the Reserve Bank of India); and Yes satisfied, when paid in INR or CFE wherever allowed by RBI.
• The recipient of service and supplier of service are not generally set of a different individual as per the Explanation-1 of the section 8: Satisfied, when recipient and supplier are distinctive legal businesses. Similarly mentioned in circular 161/17/2021-GST dated 20/09/21. 

All the above situations have to be progressively fulfilled in case to consider a performance to be export of service under GST condition. 

Validity to receive payment for export of service under GST

The export of goods or services under GST on bond or letter of undertaking under Rule 96A:

•  In case any registered individual enjoying the option to supply goods or services for export without payment of integrated tax shall accomplish, or prior to export or, a bond or a letter of undertaking in FORM GST RFD-11 to the commissioner of jurisdiction. If someone is binding themselves to pay the tax with interest mentioned as per sub-section 1 of the section 50 within a period of:
  • 15 days after the expiry of 3 months or period may be permitted by the Commissioner, from the issue date of the export invoice. In case the goods are not exported out of India; or
  • 15 days after expiry of a year, or period as may be permitted by the Commissioner, from the issuance date of invoice for export. In the matter of such services payment is not obtained by the exporter in convertible foreign exchange or in Indian currency, wherever allowed by RBI.

As per the condition mentioned under section 2(6) of the IGST Act, 2017 is not fulfilled, and based on the above explanation of Rule 96A (1)(b) for “export” of services, in case payment in convertible foreign exchange is not received then the supply cannot be export of service.

Can Rule 96A(1)(b) in the first instance be created applicable where the condition of receipt of payment for export of service under GST as mentioned in section 2(6) is not fulfilled?

To answer this question, first we need to know the GST levy. In the provision of Section 1(2) of IGST Act, 2017, extends to whole India. In certain matters, where section 13(2) of the IGST Act, 2017 is applicable, the Place of supply for export of services in GST like export of IT consulting service shall be the location of recipient. In these cases, if the location of the recipient is outside India, levy of IGST has been extended beyond the Indian jurisdiction.  

Delay in realisation of payment for exported service

The rule is silent, where the consideration is realized after discharging applicable tax after a year of expiry, whether the number is paid will be refunded. As long as the consideration is realized, the other benefits of exports should not be denied to an exporter. 

The consideration receipt is a process within a year and delay in receipt of consideration beyond one year is generally a lapse of process. Hence, the transaction will still remain export in case consideration is received even after expiry of a year.

In addition, the Circular no. 37/11/2018-GST wherein clarified as the registered person fails to comply with the conditions mentioned in the Rule 96A, the Jurisdictional Commissioner may take as granting extension of time period for export of goods and services even on post facto depend on the facts and situations of each matter. 

Takeaway

In the last thought, we can say that the export of services under GST and receipt of consideration is critical concept of international trade regulation in India. By the article one can explore about the fundamental principles governing these transactions, mentioned key considerations, and compliance needs for entities involved in cross-border service provision. If you have any questions related to export of services under GST registration, then you are free to connect with the Legal Window team of professionals.