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Where an exporter of services located in India is supplying certain services to a recipient located outside India, either wholly or partly through any other supplier of services located outside India, the following two supplies are taking place:-

1. Supply of services from the exporter of services located in India to the recipient of services located outside India for the full contract value;

2. Import of services by the exporter of services located in India from the supplier of services located outside India with respect to the outsourced portion of the contract.

Thus, the total value of services as agreed to in the contract between the exporter located in India and the recipient located outside India will be considered as export of services if all the conditions laid down in section 2(6) of IGST Act read with section 13(2) of the IGST Act are satisfied.

However supplier of services located in India would be liable to pay IGST on reverse charge basis on the import of services on that portion of services which has been provided by the supplier located outside India to the recipient located outside India. Furthermore, the said supplier located in India would be eligible for taking ITC of the IGST so paid.

Therefore, even if the full consideration for the services as per the contract value is not received in convertible foreign exchange in India, due to recipient of services located outside India has directly paid to the supplier located outside India(for the outsourced part of the services), that portion of the consideration shall also be treated as receipt of consideration for export of services in terms of section 2(6)(iv) of the IGST Act,2017.

On condition that IGST has been paid by  supplier located in India for import of services on that portion of the services which has been directly provided by the supplier located outside India to the recipient of services located outside India; and RBI by general instruction or by specific approval has allowed that a part of consideration for such exports can be retained outside India.

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