Nasscom welcomes GST council move on services exports
IT industry body Nasscom on Thursday said that the recommendations of the 57th GST Council meeting on overseas branches and R&D services address longstanding concerns related to service exports, input tax credit, refunds and compliance.
The Council, chaired by Finance Minister Nirmala Sitharaman, recommended removing existing restrictions on services supplied through overseas branches to qualify as exports, Nasscom noted in a statement. Under current regulations, services supplied from an Indian office to its overseas branch don’t qualify as exports because both are treated as establishments of the same entity. “Subject to the other export conditions, it should reduce tax uncertainty, litigation and unnecessary working capital costs,” Nasscom said, noting that Indian companies frequently serve international clients through their overseas branch networks.
Ahead of the meeting, the industry body had flagged the Goods and Services Tax (GST) treatment of head office-to-branch office (HO-BO) transactions as a persistent source of litigation, noting that the disparity between deliveries via overseas branches versus subsidiaries resulted in input tax credit reversals and additional compliance burdens for exporters.
The Council has also recommended amending the ‘place-of-supply’ rules for research, testing, certification, and engineering services conducted in India on goods belonging to overseas clients.
Presently, the physical presence of a customer’s prototype or sample in India can disqualify such services from being treated as exports. NASSCOM said the proposed change will benefit engineering research and development (ER&D) firms, global capability centres (GCCs) and deep-tech startups providing testing services globally, while helping India attract more international mandates.
Among other measures, the industry body also welcomed the Council’s decision to allow input tax credit for employee health and life insurance, the extension of inverted-duty refunds to input services, refund eligibility on plant and machinery, and faster refund processing timelines.
For the e-commerce segment, Nasscom noted that the proposed simplified registration mechanism for smaller sellers using platform warehouses in other states will facilitate interstate online trade without requiring dedicated physical premises in every state.
“The Council has addressed longstanding concerns affecting service exports, input tax credit, refunds, and compliance.
Its recommendations on notices, prosecution and arrest powers also signal a more proportionate approach to tax enforcement. “Nasscom has engaged with the Government on several of these issues through consultations and detailed submissions over the years. We appreciate the Council’s consideration of industry concerns and the Government’s continued openness to dialogue,” Nasscom said.
