The Central Board of Indirect Taxes and Customs (CBIC) clarified that supplies to parent or subsidiary companies abroad would be eligible for refunds and not qualify as exports.
This change comes as a major relief to several entities. Earlier, entities were denied refunds when they were exporting services to their parent or subsidiary companies abroad. It was based on the recommendations of the 45th GST Council meet that took place in Lucknow on Friday.
The government has now clarified that these companies will be treated as separate legal entities. This is due to the fact that they are incorporated separately in their respective countries. Moreover, experts suggest that the clarification will address concerns of the exporter community and help clear refund claims.
In addition, the CBIC had made another clarification. Wherever e-invoice has been generated, a physical copy of the invoice is not required to be carried for movement of goods. The move is aimed at facilitating ease of doing business.
The board said the following. “Various representations have been received, citing ambiguity caused in interpretation in relation to export of services. The matter has been examined.
“In view of the difficulties faced by trade and industry and to ensure uniformity in the implementation of provisions of the law across field formations, the board has clarified the issue.”
Furthermore, CBIC added the following. “It is clarified that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India, which is also referred to as foreign company under the Companies Act, are separate persons under the CGST Act, and thus are separate legal entities. Accordingly, these two separate persons will not be considered merely establishments of a distinct person.”