The Central Board of Indirect Taxes and Customs (CBIC) has notified the Circular No. 161/17/2021 in which the ambiguity regarding the export of services to subsidiary and the foreign company have been examined.
In the circular, the emphasis has been given on the provisions of Section 2(6) of IGST Act read with Explanation 1 of Section 8 of IGST Act. From the circular, it can be analyzed that supply of services by a subsidiary/ sister concern/ group concern, etc. of a foreign company, which is incorporated in India under the Companies Act, 2013 (and thus qualifies as a ‘company’ in India as per Companies Act), to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for being considered
as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of section 8 of IGST Act 2017 . Similarly, the supply from a company incorporated in India to its related establishments outside India, which are incorporated under the laws outside India, would not be treated as supply to merely establishments of distinct person under Explanation 1 of section 8 of IGST Act 2017. Such supplies, therefore, would qualify as ‘export of services’, subject to fulfilment of other conditions as provided under sub-section (6) of section 2 of IGST Act.
To view and download the Circular, click here Circular