Export of Services to US

XYZ(India) is supplying ‘Engineering Services’ to PQR (USA) which is a parent company. The services provided are 1) Designs are made by XYZ with the help of a software (Design Engineering) in relation to projects to be executed in India or outside India. If the project is to be executed outside India, the designs are sent by email to PQR for their use. If the project is to be executed in India, the designs are either first sent to PQR or are directly sent to the project site in India. Payment received by XYZ from PQR in foreign currency. 2) It is in relation to coordination of activities of a project. The project may be within India or outside India. Payment received by XYZ from PQR in foreign currency. 3) It is in relation to quality control check carried out by XYZ for the projects carried out in India. Payment received by XYZ from PQR in foreign currency. 4) Employee of XYZ stay/deputed at site in India for service as required at site. Payment received by XYZ from PQR in foreign currency. 5) Employee of XYZ will visit to site as and when called for supervision. Payment received by XYZ from PQR in foreign currency. 6) People are on pay roll of XYZ. For a project of PQR which is outside India, engineering services provided by these people by sitting in India. Amount recovered from PQR for the same with mark up in INR and GST is charged. In relation to invoices raised in INR, XYZ have Vostro account with JP Morgan which then transfers funds to XYZ normal INR account.
Whether XYZ is required to pay GST on the amount received from PQR for the above services?

Hi Kaustubh,

This is a classic and detailed scenario involving supply of engineering and related services by an Indian company (XYZ) to its parent company (PQR) in the US. Let’s analyze each type of service under GST law and its taxability:

Key Points Before Analysis

Export of services under GST means supply of services where:
- Supplier is in India (XYZ),
- Recipient is outside India (PQR),
- Place of supply is outside India,
- Payment is received in convertible foreign exchange or in INR as per RBI norms,
- Services are used outside India.
Export of services is considered zero-rated supply under Section 16 of IGST Act, meaning no GST on supply but eligible for ITC refund.

Analysis of Each Service Provided by XYZ to PQR

No.	Service Descripttion	GST Applicability	Reasoning
1	Design engineering for projects executed outside India; designs sent by email to PQR (USA).	Zero-rated (No GST)	Place of supply is outside India, recipient outside India, payment in foreign exchange = export service.
	Design engineering for projects executed in India; designs sent to PQR or project site in India.	Taxable GST applicable	Place of supply is in India (project site), so not export of service.
2	Coordination of project activities (project inside or outside India)	Depends on place of supply: If outside India, zero-rated; if inside India, taxable	Place of supply rules apply as per Section 13 of IGST Act.
3	Quality control check for projects carried out in India	Taxable GST applicable	Place of supply is in India, so GST applies.
4	Employee deputed at site in India for services required at site	Taxable GST applicable	Service performed physically in India; place of supply is India.
5	Employee visits site as and when called for supervision	Taxable GST applicable	Same as above — service performed in India.
6	Engineering services by XYZ employees sitting in India for project outside India, invoiced in INR with markup, funds via Vostro account	Taxable GST applicable	Invoicing in INR, place of supply India; so GST applies, even if payment comes via foreign account.

Summary Table

Service Type	GST Treatment	Remarks
Services related to projects outside India (design, coordination)	Export of services (Zero-rated)	Place of supply outside India, payment in foreign exchange
Services related to projects inside India (design, quality check, onsite staff)	Taxable supply (18% or applicable rate)	Place of supply is India
Services invoiced in INR for overseas project but service provided in India	Taxable supply	GST applicable despite foreign project

Important Notes:

Place of Supply Rules under Section 13 of IGST Act will determine taxability.
Payment in foreign exchange or INR (via Vostro) is relevant but place of supply and service location dominate.
Export of service is zero-rated but conditions must be fulfilled (supplier and recipient location, place of supply, payment mode).
For services used in India, GST is payable even if payment comes from outside India.

Final Advice:

XYZ should segregate services and invoices based on project location and place of supply.
Export services invoices will have zero GST.
Domestic services invoices must have GST charged.
Maintain documentation proving place of supply and nature of services for audit.