Is GST applicable on the export of services?

GST
1

India has been a significant exporter to other countries. As a result of the new rules & regulations in India that support exports, our country’s economy and GDP are expanding more quickly. Additionally, after acquiring the required registrations and licenses, you can take advantage of a number of government perks if you wish to launch an export business in India.

GST, Goods & Service Tax, must be paid for both goods and services. Export essentially means trading or supplying goods and services outside the domestic territory of a country.

Are you a professional offering service outside India?

If yes, know about the taxation and legal aspect of the export of services.

So, what is the export of services under GST?

As per GST, the export of services is when:

  • The supplier of the service is located in India
  • The recipient of the service is located outside of India
  • Supplier of service receives the payment in convertible foreign currency or Indian Currency

Treatment of export under GST

Under GST, the export of goods & services is treated as:

  • Inter-State Supply, hence IGST is charged on export
  • Zero-Rated Supply. This means export does not fall in the exempt category. Zero-Rated Supply also applies to supply export services to Special Economic Zones. However, ITC is available in such a supply. Therefore, there happens a GST refund in zero-rated supply.

Documents necessary for exporters of the services to claim a GST refund:

i. A cover Letter

ii. Bank Realization Certificates or Foreign Inward Remittance Certificates

iii. Export Invoices

iv. Form GSTR 3B and GSTR 1

v. Application for Refund in the Form GST RFD 01

vi. Canceled cheque

vii. If GST refunds claims exceed ₹2 lakhs per quarter a certificate from a Chartered Accountant/Cost Accountant.

viii. Other Documents as per Government Requirements

All the above-mentioned documents are all mandatory, a GST refund cannot be claimed without these documents.

Furthermore, taxpayers must furnish Letter of Undertaking to export services without paying IGST.

So, GST Registration is mandatory for the export of services in India. According to the government, export services are interstate taxable supplies and must have GST Registration.

2

Hi @Shrutika_Shah
Based on your third point here:

Supplier of service receives the payment in convertible foreign currency or Indian Currency

Could you please guide me in my scenario:

  • I’m working as a consultant for a US entity and providing software services but don’t know whether this can be treated as Export of Service under GST. I initiate invoice in INR and send to the client and then I receive payment in INR in my bank using Bill.com. On further enquiry I got to know that bill.com converts USD to INR in US and then I receive that payment in my bank in INR using RTGS from some intermediate bank. Do I require INR Inward Remittance and how to get it? and also would this be considered as export of services?
  • As a proof of export do I need to get FIRC or FIRA for this and get the GST exempted?
  • Also does this qualify to be an export of service. And filing LUT I can exempt from paying GST and can file 0 rated GST?
  • Is it necessary to receive payment in current account? Will saving account work?
3

Hello @Yash_123

Let me revert back to you in detail on your queries:

  1. Yes, providing consultancy services to a US entity is treated as Export of service. Whether you receive payment in INR or USD does not matter.
  2. In case you receive more than INR 20 lakhs in a financial year, you need to get a GST registration. GST rate will be 0% in case of export of service.
  3. If you are involved only in export of service and do not have any domestic sales, you can apply for LUT and get your GST registered at 0%.
  4. Getting a LUT and registering for 0% does not exempt you from getting GST registration and filing GST returns quarterly.
  5. It is not necessary to receive payment in current account. But in our opinion, to recognize it as your professional income and to keep clear records of the particular service, you should maintain a separate current account for the same.

You can book a slot using the below link, where a tax expert can be assigned to you one-on-one and answer all your queries on real time basis.

Book a MEET

Thank you.

4

Thanks @AkashJhaveri for your response. I have a follow-up:

I was going through some of the blogs/GST notices and got to know that the following point need to there in order to be classified as export of services:

the payment for such service has been received by the supplier of service in convertible foreign exchange

Could you please help me clarify the above point. Also do I need to get an FIRC/FIRA for the proof?

5

Hello @Yash_123

In your situation, the US entity pays you in USD only and it is bill.com who converts the USD to Rupees and transfer the money.

Thus, there is no such requirement of receiving the money in foreign exchange.

Also, for taxation purpose, there is no such requirement for FIRC/FIRA. You might check it out for any other purpose.

Thank you.