QUESTION

A Ltd. registered in India & also registered in GST Act. A Ltd. entered into Joint Venture (JV) with B Ltd which was registered in Singapore (Outside India). A Ltd and B Ltd entered into JV with equity holding of 51% in the name of A Ltd and 49% in the name of B Ltd. JV named as AB Ltd which will be registered in India & also registered in GST Act. AB ltd (New Company) provided services to its Associate B Ltd which was registered in Singapore. Whether it will be treated as Supply under IGST Act? If it is treated supply under IGST Act whether it will be treated as Export. If Yes, then whether refund can be claimed if GST paid in cash or whether GST can be paid by Letter of undertaking (LUT).

ANSWER

FACTS OF THE CASE:
A Ltd. registered in India entered into Joint Venture (JV) with B Ltd which was registered in Singapore (Outside India). JV named as AB Ltd which will be registered in India & also registered in GST Act. AB ltd provided services to its Associate B Ltd which was registered in Singapore.
Whether it will be treated as Supply under IGST Act? If it is treated as supply under IGST Act whether it will be treated as Export. If Yes, then whether refund can be claimed if GST paid in cash or whether GST can be paid by Letter of undertaking(LUT).

LAW APPLICABLE:
SECTION 2 of IGST Act

(6) '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;

REPLY:
As AB Ltd and B Ltd are considered as distinct persons. Therefore service provided by AB ltd to B ltd will be treated as supply.

It will be treated as export only if it fulfills all the conditions given in Section 2(6).of the IGST Act. So far as refund is concerned if the supply is treated as Export of service, then refund can be claimed in both cases i.e. if Export is made on payment of tax or even if Export is made on LUT.

Note: Please carefully check the place of supply as per Section 13 of the IGST Act. (Reply dt. 16/08/2021)