Place of Supply Rules for Imports & Exports of Services

1. Introduction

When GST came into force, it replaced a complex network of taxes with one unified system — but when services cross borders, things get tricky.

For instance:

• If an Indian company provides consulting to a foreign client, is it export?
• If a foreign firm offers digital or management services to an Indian company, is it import?
• Who pays GST, and what’s the place of supply?

To handle this, the IGST Act clearly divides such services into two categories:

• Export of Services
• Import of Services

Understanding their Place of Supply (PoS) is crucial — because it determines whether GST applies in India or not.

2. Relevant Legal Provisions

These transactions are primarily covered under:

• Section 13 of the IGST Act, 2017 → Cross-border services (when one party is outside India)
• Section 2(11) → Import of services
• Section 2(6) → Export of services
• Section 7(5) → Inter-State supply (imports deemed)
• Section 16 → Zero-rated supply (exports)

3. What Is an Export of Services? (Section 2(6) of IGST Act)

A service is treated as an export only if it meets all five conditions 

• If all five conditions are met → Zero-rated export (no GST payable). If even one fails → Treated as taxable domestic service.

Example 1 – Consulting Service to a Foreign Client

An Indian firm provides management consulting to a company in the UK.

• Supplier: India
• Recipient: UK
• PoS: UK (recipient location)
• Payment: USD via bank

Export of service → Zero-rated

Example 2 – Service to a Foreign Branch

Indian head office provides back-office support to its own branch in Singapore.

❌ Not export → Same legal entity (distinct person). GST payable as inter-State supply.

Example 3 – Web Design for Overseas Client (Freelancer)

A freelancer in Pune designs a website for a U.S. company and gets paid via PayPal.

• PoS = USA → Export → Zero-rated

Example 4 – Consultancy to Foreign Client But Delivered in India

Foreign company hires Indian consultant for a project executed in Mumbai.

• PoS = India → Not export → GST payable

4. What Is an Import of Services? (Section 2(11) of IGST Act)

A service qualifies as an import when all three conditions are met:

Then, GST is payable under Reverse Charge Mechanism (RCM) by the recipient in India.

Example 5 – Import of Consultancy Services

ABC Pvt. Ltd. (India) hires a management consultant from Singapore.

• Supplier: Singapore
• Recipient: India
• PoS: India

✅ Import of service → GST payable under RCM by ABC Pvt. Ltd.

Example 6 – Import of Legal Services

Indian company takes legal advice from a U.K. law firm.

• PoS = India → Import → GST under RCM.

Example 7 – Subscription to Online Software (OIDAR)

XYZ Pvt. Ltd. uses a U.S.-based SaaS tool.

• PoS = India → Import → GST under RCM (if registered business).

5. Determining Place of Supply (PoS) for Cross-Border Services

Let’s recap the core logic of Section 13 for international services:

6. How Export and Import Differ in GST

7. Practical Scenarios

Scenario 1 – Marketing Services to Foreign Company

An Indian agency runs digital ads for a UK brand targeting Indian customers.

• PoS = India (service used in India)
• Not export → GST payable.

Scenario 2 – IT Services for Overseas Client

Indian IT company provides back-end tech support to a U.S. firm, used outside India.

• PoS = USA → Export → Zero-rated.

Scenario 3 – Online Training Conducted by Foreign Trainer

Foreign coach conducts virtual sessions for Indian corporate employees.

• PoS = India → Import → Indian company pays IGST under RCM.

Scenario 4 – Intermediary Services

Indian agent arranges deals between two foreign buyers.

• PoS = India (supplier’s location under Section 13(8)(b))
• Not export → GST applicable.

Scenario 5 – Cross-border Event Management

Indian event planner organizes an exhibition in Dubai.

• PoS = Dubai → Export → Zero-rated.

Scenario 6 – Consultancy by Foreign Company to Indian Branch Abroad

Foreign consultant provides service to an Indian company’s Dubai branch.

• Recipient outside India → Export → Zero-rated.

8. Recent CBIC Circulars & Clarifications

9. Zero-Rated Supplies and Refunds

Export of services are zero-rated under Section 16 of the IGST Act, meaning:

• No GST payable, and
• Exporter can claim refund of:

• Input Tax Credit (ITC), or
• IGST paid on export invoices.

Two Ways to Export Without Paying GST:

Example – Export via LUT

An Indian software firm exports services to the U.S. under LUT.

• No GST charged on invoice.
• Refund of input GST on rent, software, etc.

Example – Export with IGST Payment

Consultancy firm pays IGST on export invoice → later claims refund from GST portal.

10. Key Case Law References

Let’s look at important rulings that shaped PoS interpretation 

Case 1 – Material Recycling Association of India (2020-TIOL-1274-HC-AHM-GST)

• Facts: Association arranged international conferences.
• Held: If event held outside India, PoS = foreign venue → Export → No GST.

Case 2 – Toshniwal Brothers (SR) Pvt. Ltd. (2022)

• Facts: Indian company acted as intermediary between foreign suppliers.
• Held: PoS = India (Section 13(8)(b)) → GST applicable.

Case 3 – Infinera India Pvt. Ltd. (2021)

• Facts: Indian R&D unit provided design services to foreign parent.
• Held: Separate legal entities → Export → Zero-rated.

Case 4 – Sutherland Mortgage Services (2023)

• Facts: Indian BPO provided services to U.S. company but used Indian infrastructure.
• Held: PoS = USA → Export → Zero-rated.

Case 5 – Ispat Industries Ltd. (Legacy Reference)

Held: For import of management services, recipient liable under reverse charge → PoS India.

11. Common Errors in Classifying Export & Import of Services

• Treating intermediary exports as zero-rated (wrong — PoS = India)
• Failing to receive payment in foreign exchange → not export
• Incorrectly applying Section 12 (domestic rule) instead of Section 13
• Not reporting export invoice in GSTR-1 or LUT filing
• Ignoring RCM on imported consultancy, legal, or software services

12. Practical Compliance Tips

• Use “Recipient outside India” clause in service agreements
• Keep FIRC/BRC proofs for all export receipts
• Mention country of recipient on export invoices
• Ensure PoS outside India under Section 13(2)
• Report exports correctly in GSTR-1 and GSTR-3B
• Pay RCM timely on imported services
• Maintain foreign payment trail for refund verification

13. Summary Table – Import vs Export at a Glance

14. Key Takeaways

• Exports = Services used outside India → Zero-rated
• Imports = Services consumed in India → Taxable under RCM
• PoS determines taxability, not payment location
• Section 13 is the backbone for all cross-border service rules
• Always check: supplier → recipient → PoS → payment → relationship

15. Final Thoughts

The Place of Supply rules for imports and exports of services ensure that GST follows the destination principle — tax goes where the service is consumed, not where it is produced.

For businesses, the real challenge is interpreting PoS correctly and maintaining the documentation trail — especially for digital, consultancy, or hybrid services.

In summary:

By following these rules, businesses can stay compliant and enjoy the full benefits of GST’s global framework.

Also Read: Place of Supply for OIDAR & E-Commerce Operator Services