THE CBIC CLARIFIES THAT THE SUPPLIER OF SERVICE AND THE RECIPIENT OF SERVICE ARE NOT SIMPLY ESTABLISHMENTS OF DISTINCT PERSONS IN TERMS OF THE EXPORT OF SERVICES

CBIC

After various confusions related to whether the supply of service given by the subsidiary/sister concern/group concern of a foreign company, which is incorporated under the Indian laws provides services to the company incorporated outside India, shall come under the ambit of Section 2(6) condition (5) of the IGST Act. 

Section 2 (6) condition (5) states the meaning of “export of service” which means supplier of the service and the recipient of the service shall not be considered as distinct persons. Explanation 1 of section 8 of IGST, Act states who are considered as a distinct person.

According to the above-mentioned regulations, it is concluded that a company that is formed in India and a body corporate incorporated outside India are two different ‘persons’ under the CGST and therefore two separate legal entities under GST. Furthermore, the tax authorities claimed that, under the aforementioned reasoning, any foreign company’s “subsidiary/ sister concern/ group concern” in India would be treated as a different “person,” i.e. legal entity from the foreign business.

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