04 March 2024
In case of export of services, the foreign company is insisting on making the payment in Indian rupees. Will it still count as Export of services under the GST act? If I am correct, there was change in 2022 allowing export invoicing in Indian rupees? Will I still be entitled to raise the invoice without payment of GST under LUT if I am receiving the payment in Indian rupees instead of US dollars? I am already doing export of goods in US dollars in which I am exporting on payment of IGST and taking refund from Customs. I am doing both the exports under the same proprietorship concern. Can I carry both the businesses together in which I am exporting goods on payment of IGST and taking IGST refund from customs + Exporting services without payment of IGST under LUT and taking refund from the GST dept. ? Sorry for the multiple queries but any expert opinion will be highly valuable. Thank you
07 July 2024
Let's break down your queries to provide a clear and detailed answer:
### 1. **Export of Services in Indian Rupees and GST Implications**
#### Background: As per the GST law, for any service to qualify as "export of services," the payment for such services must generally be received in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India (RBI).
#### Recent Changes: In 2022, the RBI allowed invoicing, payment, and settlement of exports and imports in Indian Rupees. This change facilitates trade settlements with countries with which India has trade relations.
#### Export of Services Criteria: According to Section 2(6) of the IGST Act, 2017, the supply of any service shall be considered an "export of service" if: 1. The supplier of the service is located in India. 2. The recipient of the service is located outside India. 3. The place of supply of the service is outside India. 4. The payment for such service has been received by the supplier in convertible foreign exchange or in Indian rupees wherever permitted by the RBI. 5. The supplier and recipient are not merely establishments of a distinct person.
Since the RBI now permits invoicing and payment in Indian rupees, you can receive the payment for exported services in Indian rupees, and it will still count as an export of services under the GST Act.
### 2. **Raising the Invoice Without Payment of GST Under LUT**
Yes, you can raise the invoice without payment of GST under LUT (Letter of Undertaking) if you are receiving the payment in Indian rupees. Since the RBI permits the invoicing in Indian rupees, it will not affect your eligibility to export services under LUT and claim GST refunds.
### 3. **Carrying Both Businesses Together**
You can definitely carry both businesses together in your proprietorship concern. Here’s how it works:
- **Export of Goods:** - You can continue to export goods on payment of IGST and then claim a refund from Customs.
- **Export of Services:** - You can export services without payment of IGST under LUT and claim a refund from the GST department.
#### Points to Note: 1. **Separate Documentation:** - Maintain clear and separate documentation for both types of exports to avoid any confusion during assessments or audits.
2. **GST Refund Claims:** - Ensure that the refund claims for IGST paid on export of goods and the refunds claimed under LUT for export of services are filed correctly and periodically.
3. **Compliance:** - Stay updated with any further changes in the RBI and GST regulations that might affect your export transactions.
### Conclusion
- **Export of Services in Indian Rupees:** Permitted under GST law as per the RBI's recent provisions. - **Invoice Without GST Under LUT:** You can raise such invoices and claim refunds under LUT. - **Carrying Both Businesses:** Allowed, provided you maintain separate records and comply with respective refund claim procedures.
This approach should enable you to manage your export operations efficiently while complying with the GST laws.
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