Under Section 2(44) of the “MGL” the supply of any service shall be treated as “export of service” when
(a) the supplier of service is located in India,
(b) the recipient of service is located outside India,
(c) the place of supply of service is outside India,
(d) the payment for such service has been received by the supplier of service in convertible foreign exchange, and
(e) the supplier of service and recipient of service are not merely establishments of a distinct person;
The definition has squarely covered each and every aspect which helps in establishing the fact of export of service. But the lacuna lies in the sub clause (e) which says ” the supplier of service and recipient of service are not merely establishments of a distinct person; “
According to the above quoted lines, Supply between two establishments having distinct identity shall be excluded from the ambit of the GST.For example A shoe making unit in Italy imports some raw material from an Indian entity ,both having separate entity in the eyes of law shall not fall within the ambit of Section 2(44) of MGL.
However it seems that this is not the intention of the lawmakers , this clause has been incorporated for those Establishments who have branches or Head office outside India. For instance, An Italian shoe leather Company having its Head office in Italy and operating with its branch in India shall be construed to be as “same person” and not “distinct person” Consequently , the supply between the branch and the head office shall not be treated as “export of Service ” under the said section of MGL.
Keeping in view of the above considerations the said part of the definition should be rectified by substituting the word “same person” in place of “distinct person”.
Views expressed are personal.