Analysis of Circular No. 161/17/2021-GST Dated: 20th September 2021 –What is export of services –Section 2(6)(v) of IGST ACT 2017-
• Export of services defined in Sec 2(6) –IGST ACT 2017 as under-
Export of services means-
I. The supplier of service is located in India;
II. The recipient of service located outside India;
III. The place of supply sevices outside India;
IV. Payment for such services reeived in convertible foreign exchange;
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;
VI. 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:
-an establishment in India and any other establishment outside India;
-an establishment in a State or Union territory and any other establishment outside that State or Union territory; or
-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.
Analysis- An Establishment of person in India and an establishment of person outside India are considered as establishment of distinct persons so cannot be treated as export of services.
Now –Above definition clarified by Circular No. 161/17/2021-GST Dated: 20th September 2021
First case– Company incorporated in India and body corporate incorporated outside India –foreign company are separate persons under CGST ACT and separate legal entities and would not be considered as merely establishments of a distinct person in accordance with above explanation.
So supply of services from Company incorporated in India to its related establishments outside India incorporated under laws outside India would not be treated as supply to merely establishments of distinct persons and therefore would qualify as export of services.
Second case- Indian company is conducting business through branch or agency representational office outside India shall be treated as establishment of said Indian company and considered as merely establishment of distinct person.
So any services provided by Indian company to branch or agency outside India will not to treated as export of services.
Crux of circular– In case branch/agency/representative office separately incorporated outside India under laws of that country will be treated as export of services otherwise not.
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