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Business News›News›Economy›Foreign Trade›GST Council likely to align export definition with forex earnings, clarify on overseas branch services

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GST Council likely to align export definition with forex earnings, clarify on overseas branch services
Synopsis

The GST Council is expected to review a proposal to redefine the definition of export for services. This proposal aims to remove ambiguities related to services provided through overseas branches of Indian companies. The changes are anticipated to enhance clarity for exporters and reduce litigation regarding service supply locations. Additionally, this could benefit various sectors including IT, consulting, and engineering firms.

Agencies

New Delhi: The GST Council on October 7 is likely to consider a proposal to make the definition of export aligned with commercial activities generating foreign exchange earned and also remove ambiguity over the export status of services supplied through an Indian company's overseas branch, sources said.



Aligning the export provision with the way services are actually exported, the proposal before the 57th meeting of the Council is with regard to exporters who work through a branch office abroad, which is the ordinary structure for an Indian firm with overseas clients. The client deals with the local overseas office, signs the contract there, and payment is often routed through it.



Currently, the GST law required that for a service to be considered exports, the supplier and the recipient should not be establishments of the same person. However, a supply routed through the exporter's overseas office fell within that description.

AMRG Global Managing Partner Rajat Mohan said the proposed changes could provide greater certainty to Indian service exporters by reducing litigation around overseas branches and the place of supply of services performed in India for foreign customers.



Also Read | Next-gen GST: Taking India's reform journey forward



The proposals before the GST Council would benefit IT/ITeS, BPO/KPO, GCCs (Global Capability Centres), R&D centres, testing laboratories, and engineering & design firms by supporting zero-rated treatment and improving access to refunds.



"By reducing tax costs and removing structural ambiguities, the reforms could make Indian service providers more competitive in global contracts and better align GST rules with evolving international business models. This will push forex earnings for the Indian economy," Mohan added.

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