Query :

A is situated in U.P. (India ) and B is situated in London . A is to provide some advisory services to B for which the payment is to be received in pound sterling. What is the nature of such services ? Whether such services shall constitute the export of services?

Reply :

1- Export of services has been defined in sub-section (6) of section 2 of the IGST Act , 2017 which embodies following provisions :

“2(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;”

Thus to constitute  export of services following conditions must be satisfied –

  • the supplier of services should be located in India .
  • the recipient of services should be located outside Indiae. in a country other than India.
  • the place of supply should be outside India . It is pertinent to note that place of supply of service shall be outside India as per the provisions embodied in section 13 of the Integrated Goods and Services tax Act , 2017 .
  • the payment for such services should have been received by the supplier of service in convertible foreign exchange; and
  • 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;”

It is pertinent to note that  the provisions embodied in Explanation-1 of section 8 which reads as follows –

“Explanation 1.––For the purposes of this Act, where a person has,––

  • 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.”

2- If we go through the provisions of section 13 of the IGST Act , 2017 it is quite evident that “advisory services ” do not fall in the ambit of sub-sections (3) to (13) of this section , therefore such services shall fall in the ambit of sub-section (2) of this section which reads as follows :

“13. Place of supply of services where location of supplier or location of recipient is outside India:

(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.”

Thus according to the provisions of this sub-section the place of supply in the instant case of advisory services provided to B (the person  situated in London) shall be the location of the recipient B.

3- The “location of recipient” is defined in sub-section (14) of section 2 of the IGST Act , 2017 in the following manner :

“2(14) “location of the recipient of services” means,––

(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and

(d) in absence of such places, the location of the usual place of residence of the recipient;”

Since in the instant case the recipient is not registered in IGST Act , 2017 being in London , thus this case will fall under clause (d) of the aforesaid sub-section and hence the location of recipient in the instant case shall be the place in  London where the recipient resides .

4- Now we conclude that in the instant case –

(1) the supplier of services is located in U.P. (India)

(2) the recipient of services is located outside India i.e. in London .

(3) the place of supply as per the aforesaid discussion is outside India i.e. at a place in London where the recipient resides .

(4) the payment for such services is to be received in pound sterling i.e. convertible foreign currency .

(5) 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.

Thus all the conditions of  “export of services ” are satisfied in this case . Hence the in the instant case the advisory services as provided by the Indian supplier to the recipient situated in London are  export of services .

 

 

 

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