Question

ABC-India is a subsidiary of ABC-UK with no common directors. Indian Co. is exporting software exclusively to UK Co. but instead of issuing Sales Invoice, Indian Co. is raising invoice in pound sterling for professional services giving the names of employees employed by Indian Co. and rates of them in the Invoice. Whether this will be considered export of software or export of professional services. What are the GST implications on Indian Co.

Answer

Facts of the case:
ABC India - subsidiary is exporting software to ABC UK

Law Applicable:
SCHEDULE II OF CGST ACT
5. The following shall be treated as supply of service, namely:'

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(d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software;

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SECTION 2(6) of IGST Act
'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; or in Indian rupees wherever permitted by the Reserve Bank of India 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;

SECTION 8 of IGST Act

.''For the purposes of this Act, where a person has,''

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State; or

(iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

Interpretation:
Explanation to Section 8 dictates that establishment in India and other establishment outside India of the a Person shall be deemed to be establishments of a distinct person.

ABC India and ABC UK can not be said to be a Person because both the companies are separate legal entities in the eyes of law. Therefore these two are not establishments of a distinct person and is not covered by explanation to section 8.
Thus condition of Export of service u/s 2(6) sub clause (v) is not violated and this transaction can be called an export of service assuming that all other conditions of export are fulfilled.

Conclusion:
It will be considered as export of service and thus it is Zero rated supply. (Reply dt.07/06/2019)