An update on recent circulars providing clarifications on export of services under GST and refund related issues

  1. Circulars


Issue Clarifications
Circular No. 78/52/2018-GST- Export of services

Clarification provided with respect to services provided to a recipient located outside India either wholly or partly through any other supplier of services located outside India

·                The Circular has clarified that in case where supplies are made to a recipient located outside India, where a portion of the service is sub-contracted (say to XYZ), there are 2 supplies:


Supply 1
Supply of services from the exporter of services (ABC Ltd) located in India to the recipient of services located outside India for the full contract value


On this leg, it has been clarified that so long as the conditions laid down under Section 2(6) of the IGST Act read with Section 13(2) are satisfied, it would qualify as “export of services”


Even if full consideration for export of services is not received in convertible foreign exchange in India due to the fact that the actual recipient has directly paid to the supplier of services located outside India (for the outsourced part of the services), that portion of the consideration will also be treated as receipt of consideration for export of services provided:

·                IGST has been paid under RCM on the outsourced portion of services imported by the exporter, and

·                RBI by general instruction/by specific approval has allowed that a part of the consideration for such exports can be retained outside India

Supply 2 Import of services by exporter (i.e. ABC Ltd) in respect of outsourced services


The Circular clarifies that the supplier of services in India (i.e. ABC Ltd) would be liable to pay IGST on reverse charge basis on such import of services.


It further clarifies that input tax credit of such GST paid would be available.


Key takeaways


·                While the clarification is helpful, what is important to note that in the illustration provided in the Circular, it is specified that the sub-contractor or the entity providing part of the services overseas should not be “merely establishments of a distinct person”.


·                The clarification in this Circular does not address the HO-BO model followed widely by the IT/ ITeS sector.  NASSCOM’s ask under the HO-BO model has always been to exclude the fund transfer made by the exporter to its overseas branch from the ambit of “import of services”.


·                The clarification of services qualifying as exports even where full consideration is not received in India because a part of the amount was utilised for direct payment to the sub-contractor is of course a welcome one.


Circular No. 79/53/2018-GST- Refund


Clarifications regarding refund related issued

Physical submission of refund claims no longer required


·                The Circular clarifies that it is not mandatory to physically furnish the refund application in Form GST RFD-01A or any of the supporting documents (including copy of invoices for which details are not appearing in GSTR-2A).  Instead, the same can be e-uploaded on the GSTN portal.


·                That the ARN will be generated only after the taxpayer has completely submitted the e-refund application with the supporting documents/undertaking/statements/invoices and the refund amount has been debited from the electronic credit/cash ledger, as the case may be.


·                That on generation of ARN, the refund application with supporting documents will be e-transferred to the concerned tax officer.


·                That the date of filing of the application will be the date of generation of the ARN and the time limit of 15 days to issue an acknowledgement will be counted from that date.


·                That for the time being, the acknowledgement for the complete application or deficiency memo will be issued manually by concerned tax officer.


·                That the refund application to be filed after issuance of the deficiency memo, should be filed manually with the concerned tax officer.


Key takeaway


·                This is a huge relief as physical submission of documents is time consuming and leads to additional cost.


Disbursal of refund amounts after sanction


·                Interest on non-credit of amount to be refunded, will be calculated starting from the date immediately after expiry of 60 days from the date of receipt of the application till the date on which the amount is credited to the bank account of the taxpayer.


Guidelines for refund applications that have been generated on the portal but not physically received in the respective tax offices


·                In respect of the refund applications not received in the tax office within a period of 60 days starting from the date of generation of ARN:

a)        A list of the applications will be compiled,

b)        An email will be sent to all such taxpayers on their registered email IDs with a direction to file the application physically within 15 days of the date of the email,

c)         The contact details of the jurisdictional officer for furnishing the information will be provided in the mail,

d)        If the taxpayer fails to physically submit the application within 15 days, the application will be summarily rejected and the debited amount, if any, shall be re-credited to the electronic credit ledger.


·                The said amount will be re-credited even though the return in FORM GSTR-3B, as the case may be for the relevant period has not been filed.


Non-consideration of ITC of GST paid on invoices of earlier tax period availed in subsequent tax period


·                 “Net ITC” for the purpose of claiming refund of unutilized ITC can be said to have been “availed‟ as and when it is entered into the credit ledger of the taxpayer (i.e. upon filing of monthly return in Form GSTR-3B).


·                Hence ITC of invoices issued in earlier tax period (say August 2017) and “availed‟ in subsequent tax period (say September 2017) cannot be excluded from the calculation of the refund amount for the subsequent tax period (i.e. September 2017).



  1. Two relevant orders, providing extension/ relaxation in relation to compliances


Issue Clarifications
Order no 2

Relaxation in availment of ITC on invoices pertaining to FY 17-18

Specifies that:


·                Input Tax Credit on invoices and debit notes of F.Y 2017-18 can be availed till the due date of furnishing return of March 2019. The only conditions in order to be eligible to avail ITC is the supplier must have uploaded the invoice details in their returns. 


·                In connection to the above, now the supplier can also rectify any error/ omission made in GSTR-1 under Section 37(3) for the period 17-18 till due date of furnishing return of March 2019.


·                Relevant extract of the proviso is provided below –


“Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019”.


Key takeaways


·                 This point advocated by NASSCOM even during our meetings with the authorities in October/ November 2018, has come through and is of benefit to our members.


·                 This relaxation is a welcome move and will now allow taxpayers to avail any credit not availed till date pertaining to FY 17-18.

Order no 3 Due date of filing of annual return in Form 9 and annual audit report in Form 9C extended till June 30, 2019



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