Clarification relating to export of services-condition (v) of section 2(6) of the IGST Act 2017

Circular No. 161/17/2021-GST

F. No. CBIC-20001/8/2021–GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing

New Delhi, dated the 20th September, 2021

To
The Pr. Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)
The Principal Directors General / Directors General (All)
Madam / Sir,

Subject: Clarification relating to export of services-condition (v) of section 2(6) of the
IGST Act 2017–reg

Various representations have been received citing ambiguity caused in interpretation of
the Explanation 1 under section 8 of the IGST Act 2017 in relation to condition (v) of export
of services as mentioned in sub-section (6) of the section 2 of the IGST Act 2017. Doubts have
been raised whether the supply of service by a subsidiary/ sister concern/ group concern, etc.
of a foreign company in India, which is incorporated under the laws in India, to the foreign
company incorporated under laws of a country outside India, will hit by condition (v) of subsection (6) of section 2 of IGST Act.
2. The matter has been examined. In view of the difficulties being faced by the trade and
industry and to ensure uniformity in the implementation of the provisions of the law across
field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central
Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies
the issue in succeeding paragraphs.
Relevant legal provisions:
3.1 The export of services has been defined in sub-section (6) of the section 2 of the IGST
Act 2017 as under:
(6) “export of services” means the supply of any service when,––
(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in
convertible foreign exchange; and
(v) the supplier of service and the recipient of service are not merely
establishments of a distinct person in accordance with Explanation 1 in section
8;
3.2 Explanation 1 of the Section 8 of the IGST Act provides for the conditions wherein
establishments of a person would be treated as establishments of distinct persons, which is
reproduced as under:
Explanation 1.––For the purposes of this Act, where a person has,––
(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment
outside that State or Union territory; or
(iii) an establishment in a State or Union territory and any other establishment
being a business vertical registered within that State or Union territory, then
such establishments shall be treated as establishments of distinct persons.
As per the above Explanation, an establishment of a person in India and another establishment
of the said person outside India are considered as establishments of distinct persons.
3.3 Reference is also invited to the Explanation 2 of Section 8 of IGST Act, which is
reproduced below:
“Explanation 2.––A person carrying on a business through a branch or an
agency or a representational office in any territory shall be treated as having
an establishment in that territory.”
3.4 Reference is also invited to the definition of “person” as provided under CGST Act
2017, made applicable to IGST Act vide section 2(24) of IGST Act 2017. “Person” has been
defined under sub-section (84) of the section 2 of the CGST Act 2017, as under:
(84) “person” includes—
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated
or not, in India or outside India;

Download Full Circular….Circular No. 161_14_2021_GST

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