Question

A Indian company has made rendered services to its fellow foreign subsidiary company located in UK. The UK company is engaged in lending activity to Indian concerns. The UK company has outsourced its project appraisal, supervision and monitoring activity to its fellow Indian subsidiary company. The Indian company carries out all activities for and on behalf of UK company in India. As per the terms of agreement between the Indian company and the UK company the consideration for the services rendered by the Indian company are remitted in Indian rupees on a quarterly basis. The UK company has its bank account with Indian Bank’s foreign branch. Remittance is being sent in INR from this bank account. QUERY
1. Whether the transaction can be categorised as export within the meaning of section 2(6) of IGST Act, even though the payment hasn’t been received in freely convertible foreign exchange.
2. In case the transaction cannot be categorised as export, then whether the transaction would be chargeable to CGST/SGST or IGST.
3. If we categorise the transaction under IGST transaction (not as export) then the problem arises in filing of GSTR-1, wherein case of transactions other than export, relevant state name has to be mentioned in place of supply.

Answer

1. To qualify under category of export all the conditions given in section 2(6) of IGST Act should be fulfilled. But in your case as the payment is received in Indian currency, it cannot be termed as export of service.

2. This is a problem in the portal that the Foreign country cannot be selected as Place other than in case of export. So you should select export for filing of GSTR-1. If you are selecting export but not claiming refund of IGST then there is no problem. In some cases people are selecting state of the Indian Company as Place of supply. But this is wrong because it will attract CGST & SGST instead of IGST and in future section 77 of CGST Act may be invoked.

So selection of export to file the return but not claiming any benefit of export is safe route.(Reply dt.19/07/2018)