Export of services under GST

Dear Sir,

In reference to your query, you are providing consulting services to an entity located outside India, and accordingly the same would be classified as export of services subject to satisfaction of the specified conditions.

Your transaction will be reportable as zero rated transactions, and subject to submission of LUT you would not be required to pay taxes on your service exports. However if LUT is not submitted, then in that case you would need to deposit GST and later on claim refund of the same.

It would be advisable for you to file LUT and proceed without payment as it involves less hassles as also saves on cash flow and compliance cost for claim of refund.

There would be no problem to you in your remittance. Your Italian client getting their production done in India is irrelevant for you, as that is an independent transaction and not connected to you but placed with a different supplier.

Please advise in case of any further clarification.

Thanks & Regards,

CA Aditya Dhanuka.

- Services provided by you are not exempted under GST. It is an export of services. Under GST, export of services are treated as zero rated supply of services.

Export of services means supply of services when -

1) Service provider is located in India

2) Service recipient is outside India

3) Place of supply is outside India

4) Consideration received is in convertible foreign exchange

5) The supplier of service and recipient of service are not merely establishments of  a distinct person

- By filing LUT you can export without payment of tax (i.e. IGST). LUT is filed at the begining of the Financial year and for every financial year.

- GST registration is mandatory after crossing threshold limit of annual aggregate turnover of Rs. 20 lacs in a financial year. Registration should be applied within 30 days of applicability.

- You can claim refund of unutilzed ITC

- If you have not filed LUT but fulfiled all the above 5 conditions then you are liable to pay IGST and later on can claim refund of the same.

- Collect FIRC from the bank against each foreign inward remittance.

- Raise invoice in proper format as prescribed for "Export of services"

- There should be a formal agreement for such services covering all the relevant clauses and properly signed by both the parties.

- You should have separate current account for the business.

- Under Income tax you may opt for presumptive taxation scheme if constitution of business is Individual or HUF or partnership firm

- Turnover in GST returns and Income tax returns should be reconciled.

- Production of foreign buyer in India or purchase from other exporters in India is an independent transaction of the overseas buyer.

For detailed discussion you may opt for phone consultation.

Your services will be covered under export and you can file an LUT. As the design is used abroad there should not be any problem from GST perspective.

Hi, 

You are correct that you are doing export of services and these are treated as zero rated supply of services. But be mindful that for qualifying it as export of services, the consideration should always be in convertible foreign exchange. 

You can file LUT at the beginning of financial year and export without payment of tax. However, GST registration is mandatory after crossing threshold of annual aggregate turnover of Rs. 20 Lakhs in financial year. If you have not filed LUT  then you are liable to pay IGST and later on can claim refund of the same.

Also, do note that you need to have foreign inward remittance certificates from the bank and the invoices.

Production of foreign buyer in India or purchase from other exporters in India is an independent transaction of the overseas buyer and may not be issue for you.

In case of detailed consultations, please contact us at [deleted]

Regards

CA Prerna Peshori

As you have said that your total turnover is way above Rs. 20 Lakhs therefore you are required to register yourself under GST and file all returns. 

In your case since all the conditions of export of services (assuming the ownership of designs remains with you) are being fulfilled therefore you can export under LUT without any GST liability.

As far as the production is concerned if the foreign party has a separate contract with the manufacturers it does not affects the nature of your supply.

Hope this helps

Regards

Altamush 

Hello sir

The export of goods or services is considered as a zero-rated supply. GST will not be levied on export of any kind of goods or services. A duty drawback was provided under the previous laws for the tax paid on inputs for the export of exempted goods. It not exempted.

It is not necessary for the you to file for LUT if you are exporting goods or services. ... If the client goes for LUT, you  may supply goods or services under bond or LUT without payment of integrated tax and can claim refund of unutilized input tax credit.

We can assist you.

Please have a phone call for details discussion.

How are you dealing with it right now as you are saying you have around 1 crore turnover.

No you are not exempted from GST just because your client is outside India.

Yes you should file lut but it depends on various other factors.

I would recommend to book consultation to discuss same in detail.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you