Q. 44 An Indian Private Limited Company, incorporated under Companies Act,2013 hereinafter called ‘Indian Company’ proposes to hold 100% shareholding of a Company incorporated in a foreign country under Companies Act of that country, called ‘Foreign Company’.

‘Foreign Company’ will procure contract of accounting jobs of different clients of that country and/or other countries, and that cloud accounting will be carried out by ‘Indian Company’ in India and ‘Indian Company’ will raise invoice upon ‘Foreign Company’ with specific margin, as agreed upon. The payments of the aforesaid invoices will be received by ‘Indian Company’ in convertible foreign exchange from the ‘Foreign Company’.

‘Foreign Company’ will raise invoices upon its local clients and/or foreign clients, whose accounting job is contracted for, as per contracted rates between ‘Foreign Company’ and local clients of that country and/or other countries.

Under these facts,’Whether Supply of services by ‘Indian Company’ to ‘Foreign Company’ is covered under section 2(6) of the IGST Act i.e. it will amount to Export of Services, in compliance to circular no.161/17/2021-GST.

It is hereby requested to enlighten us whether under the above said facts it will be a case of exempted export of services. 

Ans. In the given case, Indian Company and Foreign Company both are separate persons for the purpose of Export of Services. The given circular has in itself clarifies the same situation wherein subsidiary companies/holding companies not to be treated as mere establishment of a distinct person.

Therefore, if all other conditions of Export of Services are satisfied in that case the given situation would qualify as Export of Services and in compliance with the Circular No. 161/17/2021-GST. Further, you can do Export of Services without payment of duty if LUT has been obtained or with payment of duty without LUT.