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GST on Export of Services to Nepal and Bhutan
Abhishek Kumar / 2020-01-31 05:44:17It is beyond any contradiction that the amendments under the GST laws have been reworked or modified continuously in order to make them more appreciated for various sectors of the economy. These reforms have altogether relieved the burden and complexities of the common taxpayers as well as the tax authorities.
Before getting into the main topic, let us first understand what export exactly is:
EXPORTS:
The term“Export of Goods” can only be used when the Goods are physically moved from the home country (India) to a Place outside the home country. Whereas the term “Export of Services” can be used only if the 5 following conditions are fulfilled:
1- The service provider should be situated in India.
2- The recipient of the service should be situated outside of India.
3- The place where the service is provided is also out of India.
4- The payment for such service must be paid to the supplier of service in-convertible foreign currency or in Indian rupees level permitted by the Reserve Bank of India.
5- The supplier of the service and the recipient of the service are not merely establishments of a distinct person in accordance with the explanation 1 in section 8.
The 4th condition that states ‘The payment for such service shall be received by the supplier of service in convertible foreign currency or in Indian rupees level permitted by the reserve Bank of India’ is the condition which is generally not satisfied while supplying to Nepal and Bhutan since Indian currencies are easily accessible in those countries. In Nepal and Bhutan, there can be situations where the payments for the services are received in Indian currency.
#Can it be called an Export?
An export issued by CBEC says "Export of services to Nepal or Bhutan fulfils the condition of GST Law regarding taking the services out of India.” But the supplies of services to Nepal and Bhutan with the payment as Indian currency does not satisfy the fundamental conditions of ‘export of services’ and definition of ‘export of services’ within the GST Law states that the payment for such services have to be compelled to be received by the supplier of services in convertible exchange currency.
Such supplies to Nepal and Bhutan are not to be thought of as exports and are conducted on a zero-rated basis. It will be eligible to obtain all the advantages that are offered to zero rated supplies under the GST policy.
Although, service supplier would need to bear the GST Registration Online and apply for the unique Import Export Code Registration if his intends to supply services to their consumer placed in Nepal or Bhutan, however the same trade will not be thought of as export.
Notification 42/2017 on 27th Oct 2017 states that no IGST would be levied on the supply of services from India to Nepal and Bhutan against payment in Indian rupees.
Conclusion
In case of Nepal & Bhutan, if the payments are received in Indian currency, such services won't be treated as exports and no IGST liability is going to be incurred as per the said notification 42/2017.
#Where should you go for GST Registration?
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