Whether services provided by a establishment of a foreign company come under the ambit of Export of Services?

What is Export of Services?

What is Export of Services?

• An establishment in India and any other establishment outside India
• An establishment in state or union territory and any other establishment outside that state or union territory
• An establishment in state or union territory and any other establishment being a business vertical registered with that state or union territory

Here the person includes

• An individual
• Hindu Undivided Family
• Company
• Limited Liability Partnership
• Association of person or a body of individuals, whether incorporated or not, in India or outside India
• Any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act 2013
• Any body corporate incorporated by or under the laws of a country outside India
• Co-operative society registered under co-operative society act
• Local authority
• Central Government or State Government
• Trust; and
• Every Artificial juridical person, not falling within any of the above

Clarification

• In view of the above, it is clarified that a company incorporated in India and a body corporate incorporated under the laws of a country outside India are separate persons under CGST Act, and thus are separate legal entities. Accordingly, these two persons would not be considered as “merely establishments of a distinct person”
• Therefore, supply of service by a subsidiary/sister concern/group concern, etc of a foreign company which is incorporated under the Companies Act 2013 to the establishment of the said foreign company located outside India attracts Export of Services as it would not be treated as supply between merely establishments of distinct person
• Similarly, supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India would not be treated as supply to merely establishments of distinct person. Such supplies would qualify as export of services
• Here the establishment of foreign company include branch, agency, and representation office on prior approval of Reserve Bank of India
• RBI has provided a list of services that establishment of foreign company can provide to its parent company located outside India

e.g : X ltd a foreign company sets an establishment in India, without registering under the laws of India. Hence supply of services by establishment of a foreign company in India to its establishments outside India does not come under the ambit of export of services

Summary

• Supply of service by establishments of a foreign company, not incorporated in India to any other establishments of the said foreign company outside India cannot be treated as export of services
• Supply of services by an Indian company to its establishments located outside India, not registered under the laws of other country does not come under the ambit of export of services
• These type of establishments are closely monitored by Reserve Bank of India and there are a list of services provided by RBI that a establishments can provide to its parent company