In re Hilti Manufacturing India Pvt. Ltd.(GST AAR Gujarat)
R&D services provided to foreign company considered as export of service
The AAR, Gujarat, in M/s. Hilti Manufacturing India Pvt. Ltd. [Advance Ruling No. GUJ/GAAR/R/2023/26 dated July 12, 2023] held that, services provided by the assessee to the entities located outside India is covered under section 13(2) of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”). Accordingly, such services would qualify to be treated as export of service.
Facts:
M/s. Hilti Manufacturing India Pvt. Ltd. (“the Applicant”) is a part of HAG group. The Applicant is registered under the Companies Act, 2013 having registered office in India and is engaged in the manufacture and supply of diamond cutting tools, other innovative tools required by the construction industry and provides in-house research and development service on diamond inserts.
The Applicant had a separate Research and Development (“R&D”) unit wherein activities are carried out for their own purposes as well as for other customers, that they carry out R&D activities on behalf of entities situated outside India i.e. on the product samples/goods sent by the foreign entities for R&D purposes and they submit a detailed report.
The Applicant had entered into an agreement with M/s. HAG (“a foreign company”) for carrying out various R&D activities on the product samples, testing & engineering activities for developing new products.
The Applicant stated that the result report of R&D activities was provided to the foreign company comprising of findings, performances, parameters, know-how, inventions, developed processes, objects and programs in the form of a report and an illustrative copy of such an R&D report was submitted to the Revenue Department (“the Respondent”).
The Applicant further stated that periodic invoices were raised inclusive of IGST @ 18% for such services to the foreign company for which consideration is received in foreign currency and they were discharging IGST on such services.
The Applicant filed advance ruling for seeking clarification on services provided to the foreign entities can be treated as export of service.
Issue:
Whether the R&D services provided by the Applicant to the foreign company can be considered as export of service?
Held:
The AAR, Gujarat, in Advance Ruling No. GUJ/GAAR/R/2023/26 held as under:
