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A service between an Indian office and an overseas branch or head office of the same legal person does not qualify as an export of services under India’s IGST Act. The Act treats those establishments as distinct persons, and export condition (v) excludes a supply when supplier and recipient are merely establishments of the same person. A separately incorporated Indian subsidiary is a different legal person from its overseas parent, so that exclusion does not by itself prevent export treatment—but every other export condition must still be met.
Why a same-company overseas branch transaction is not an export
Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) makes the export definition a five-part test. One of those requirements is that the supplier and recipient must not be merely establishments of a distinct person under Explanation 1 to section 8. The Act treats an establishment in India and another establishment of the same person outside India as establishments of distinct persons. It also treats a person carrying on business through a branch or agency in a territory as having an establishment there.
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That rule covers both an Indian branch providing services to its foreign head office and an Indian head office providing services to its own overseas branch. Different countries, separate accounting records, a foreign-currency remittance, or an overseas business address do not make the two establishments separate legal persons.
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A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11| Arrangement | Effect of export condition (v) | What else must be checked |
|---|---|---|
| Indian branch and overseas head office of the same foreign company | Fails: they are establishments of the same person. | Consider the applicable GST treatment; the service cannot be treated as an export on the basis of the other export conditions alone. |
| Indian head office and its overseas branch | Fails: they are establishments of the same person. | Consider the applicable GST treatment; the service cannot be treated as an export on the basis of the other export conditions alone. |
| Separately incorporated Indian subsidiary supplying its foreign parent | Condition (v) does not by itself bar export treatment: the companies are separate legal persons. | All other export conditions, including recipient, place of supply, and payment requirements, must be satisfied. |
CBIC Circular 161/17/2021-GST, issued on 20 September 2021, explains this distinction between same-person establishments and separately incorporated companies. Its conclusion about supplies between separate incorporated persons is conditional on meeting the remaining requirements in section 2(6); it does not make every related-party service an export.
What are the five export-of-services conditions?
All five conditions in section 2(6) must be met together. A foreign customer or payment from abroad, considered alone, is not enough.
- Supplier location: The supplier of the service is located in India.
- Recipient location: The recipient of the service is located outside India.
- Place of supply: The place of supply is outside India.
- Payment: Payment is received in convertible foreign exchange, or in Indian rupees wherever permitted by the Reserve Bank of India (RBI).
- Separate establishments: Supplier and recipient are not merely establishments of a distinct person under Explanation 1 to section 8 of the IGST Act.
For a same-company Indian branch and foreign head office, condition five is decisive: the supply does not satisfy the export definition even if the other four conditions appear to be satisfied.
Can an Indian subsidiary export services to its overseas parent?
Potentially. A separately incorporated subsidiary and its foreign parent are separate legal persons, unlike a branch and the head office of one company. CBIC Circular 161/17/2021-GST says that supplies between such separately incorporated persons can qualify as exports, subject to the other conditions in section 2(6).
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That means the actual transaction still needs to be examined. Identify the service supplied, the recipient of that service, the applicable place-of-supply rule, how payment is made, and whether the supplier and recipient are in fact separate legal persons. A group relationship by itself does not settle export eligibility either way.
How place of supply and intermediary services affect the result
For services supplied across borders, section 13 of the IGST Act generally places the supply at the recipient’s location, but it includes exceptions. Under section 13(8), the place of supply for intermediary services is the supplier’s location. If that location is in India, the place-of-supply condition for export may not be met.
Whether a service is an intermediary service depends on what the supplier actually does, including whether it supplies a service on its own account or arranges or facilitates a supply between other parties. A provider does not become an intermediary merely because it is a head office, supports a related company, or operates within a corporate group.
- Identify the particular service the supplier undertakes to provide.
- Determine who actually receives that service and which establishment is most directly concerned with receiving it.
- Check the general place-of-supply rule and any applicable section 13 exception, including the intermediary rule.
How domestic head-office and branch transactions differ
Registrations of the same organization in different Indian States raise domestic GST questions; they are not the same issue as exporting a service to an overseas establishment. Section 25 of the CGST Act treats distinct registrations as distinct persons. CBIC Circular 199/11/2023-GST, dated 17 July 2023, discusses how a head office in one State and branches in other States should handle common third-party input services and internally generated services.
| Transaction type | CBIC Circular 199/11/2023-GST guidance | Important qualification |
|---|---|---|
| Third-party common input services procured by head office and attributable to one or more branches | The head office may distribute credit through the Input Service Distributor (ISD) mechanism or issue tax invoices to the relevant branches. | The service must be attributable or provided to the branch, statutory input tax credit conditions apply, and ISD registration is required if the ISD route is used. |
| Internally generated services supplied by head office to a branch eligible for full input tax credit | For Rule 28 valuation, the value declared in the invoice is deemed to be the open market value, even if a particular cost component, such as employee cost, is not included. If no invoice is issued, the value may be deemed nil where the branch has full input tax credit. | Apply the rule to the specific service and the recipient branch’s eligibility for full credit. |
| Head-office employee salary cost in the value of internally generated services | The circular says this cost is not mandatorily required to be included in the taxable value even where the branch does not have full input tax credit. | Check that the rules and circular remain applicable to the relevant tax period and facts. |
The circular is dated 2023. Its treatment should be checked against the law, rules, and later clarifications applicable to the transaction period rather than assumed to apply unchanged to every arrangement.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Does payment in Indian rupees count?
It can count toward the payment condition where the RBI permits receipt in Indian rupees. The statutory wording includes Indian rupees wherever permitted by the RBI. CBIC Circular 88/07/2019-GST discusses INR realization under applicable RBI rules and says that LUT treatment is permissible for covered supplies, whether payment is in INR or foreign currency, when RBI guidelines are followed. Circular 165/21/2021-GST also refers to payment in foreign exchange or INR wherever permitted by the RBI.
Payment method does not decide the whole export question. In particular, a permitted INR remittance cannot overcome the same-person-establishments exclusion, and payment through a particular channel cannot establish export treatment if the place of supply is in India. Check current RBI permissions and the documentation required for the transaction.
What zero-rating means after a supply qualifies as an export
Qualifying exports are zero-rated under section 16 of the IGST Act. The statutory options include supplying under a bond or Letter of Undertaking (LUT) without payment of IGST and claiming a refund of eligible unutilized input tax credit, or paying IGST and claiming a refund under the applicable statutory provisions and rules.
These are procedures for a supply that already meets the export definition. Using an LUT or pursuing a refund does not turn a service between establishments of the same legal person into an export.
Quick Recap
What to establish before applying export treatment
- Legal identity: Confirm whether the overseas counterparty is a branch or head office of the same legal person, or a separately incorporated entity.
- Service and recipient: Record what the supplier provides and which recipient establishment receives it.
- Place of supply: Apply section 13 and check for exceptions, especially the intermediary-services rule.
- Payment permission: Confirm that the payment method and currency meet the statutory requirement and, for INR, that the RBI permits it.
- Applicable period: Check the amended Act, rules, circulars, and RBI permissions relevant to the transaction period.
- Domestic registrations: If the transaction is between Indian State registrations, separately assess invoicing, credit distribution, input tax credit eligibility, and valuation.
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