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Article Dated 02nd May, 2023


Export forms an essential driver of economic growth. If a nation intends to achieve prosperity it must endeavour to strengthen it`s export market and ensure that finest quality of goods reach the overseas market at the most competitive prices. To ensure competitiveness government tries to remove the effect of indirect taxation from the goods or services exported out of the nation. To ensure that the burden of indirect taxation do not get passed on to the ultimate recipient sitting overseas, government first needs to identify what qualifies as Export of goods or services or both. To identify the same Export of goods and Export of services have been defined under the IGST Act, 2017, relevant extracts of which are reproduced in the fore coming para. Once export is identified government can then move on to zero rate the export of such goods and services.


Export of goods [Section 2(5)]-

"(5) "Export of goods" with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;"

Export of services [Section 2(6)]-

"(6) "Export of services" means the supply of any service when,—

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the Place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;"

While in case of goods the conditions seem to be pretty simple i.e., take goods out of India, the same can not be said for Export of services. For supply of services to qualify as export conditions mentioned hereunder needs to be necessarily fulfilled.

  1. Supplies should be located in India and recipient should be located in any country/territory outside India. This condition usually gets fulfilled and involves no technicalities.

  2. The consideration for such supply should be received in convertible foreign exchange, Like Dollar, Euro, Pound etc. However, payment in Indian Rupee is also accepted where permitted by RBI like in case of exports to Nepal.

  3. The supply should not be between distinct establishments of the supplier. For example supply between Infosys, India and Infosys branch located in the US shall not be categorised as exports.

  4. The Place of supply should be outside India.

Let`s understand this with the help of an example. If a broker residing in India let`s say A helps another person let`s say B, located in the US to procure some goods and in consideration thereof B shall pay A certain commission let’s say in US dollars. In this example, the supplier of service is located in India while the recipient of service is located outside India. A & B are not merely establishments of distinct person and the consideration for the service provided shall also be received in convertible for in exchange that is US dollar. Still the supply of service shall not be considered as an export of service as the Place of supply does not fall outside India. Place of supply in this case shall be the location of supplier of service in accordance with section 13(8) of the IGST Act, 2017. Relevant extracts of the provision are reproduced below-

"(8) The Place of supply of the following services shall be the location of the supplier of services, namely:—

(a) services supplied by a Banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) intermediary services;

(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. ……."

Section 2(13) of the IGST Act, 2017-

"(13) "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;"

Since in our example A is engaged in providing intermediary services the Place of supply shall be location of A itself. Therefore, while determining whether supply of certain service is export or not much emphasis has to be provided on whether the Place of supply falls outside India or not.

And therefore determining whether supply of goods is export or not is much simpler as there are no conditions with regards to location of supplier or recipient nor there is any condition with regards to receipt of payment in convertible foreign exchange. Even if the supplier and recipient are separate establishment of distinct person then also supply of goods shall be treated as export.

In the upcoming articles we shall discuss how such exports get zero rated and how tax payer can avail refund of input tax credit received on inward supplies.

CA Pranay Jain is a young and aspiring Chartered accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.

He is also socially active on LinkedIn at

CA Pranay Jain
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