Are Service Exporters Required To Pay Tax Under GST? The Mystery Deepens…

Contrasting views create more confusion.


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Ever since GST regime came into effect from last month, service exporters in India have been facing this dilemma: Should they register under GST and pay tax? Or their income is non-taxable?

In the last few weeks, different contrarian views have emerged regarding this issue, and this has only added to the chaos.

Freelancers and companies undertaking digital and IT projects from abroad are classified under Service Exporters, and this is indeed a burning issue which has still not been resolved.

Here, we attempt to present both the views on this issue.

Service Exporters Are Not Required To Register Under GST

A self-acclaimed tax expert has published a blog on Nasscom’s community blog regarding this issue, and as per the claims made, service exporters are exempted from GST.

He presents 6 arguments to support his logic.

The prominent one being that any form of service export is classified under ‘Zero Rated Supply’, which means that no GST registration is required, hence no tax is payable.

Section 16 (1) of Integrated GST states:

16. (1) “Zero rated supply” means any of the following supplies of goods or services or both, namely:—

(a) export of goods or services or both

Besides, Section 16 (3) of the same Act makes it clear that in case an exporter wants Input Tax Credit, then he may register under GST to claim the same.

The blogger concludes: “Therefore in my considered opinion , there is no need of registration by a person who is involved in export of goods or services if he/she/it does not desire any claim of input tax credit .”

Note here, that this blog is not an official endorsement by Nasscom on this issue, as the blog was published on the Community platform of Nasscom. As we investigated the blogger, we found him describing himself as Tax Expert on his Facebook profile.

We can neither confirm or deny these claims made.

You can find the blog here.

A similar blog by an Independent legal service professional on Business Standard too echoed this viewpoint, and claimed that no GST required for Service Exporters. (the article is locked behind paywall)

Service Exporters Are Liable To Pay GST

Meanwhile, an article published by The Tribune claimed that freelancers exporting their software development skills will be required to pay GST.

As per the article, “.. If a freelancer is earning even a single rupee from outside the state, then he is liable for GST registration in India.”

But that is not all. The article also claims that such a freelancer or service exporter is not covered under the basic exemption of upto Rs 20 lakh annual income.

In fact. Mastan Singh Chambyal, a CA, and vice-chairman, Chandigarh branch of Institute of Chartered Accountants of India (ICAI) said, “There is no minimum exemption limit. Even the freelancers are also covered and have to get themselves registered. Under the GST, exports have been categorised as zero-rated supply and under the new regime, taxes paid on input as well as output supplies are refundable,”

We have reached out to professional tax experts regarding this issue, and will update the blog post based on their opinions.

Meanwhile, do share your views, opinions and questions by commenting right here!

  1. Parag says

    My firm is export Data Services to clients in USA. All the money comes in Indian Rupees via Paypal to our company’s Bank Account. I’m not sure, that we fall under the Category of Zero Rated Services or not.
    Do we need GST number and IEC code?

    1) Is the LUT or Bond required in my case also?

    Thanks in advance for your help!?

  2. S E Prabakar says

    Sec 24(I) of CGST Actrequires that “persons making any inter–State taxable suppply ” is required to be registered under GST Act, irrespective of turnover limit. ;
    Sec 7(5)(a) of IGSTAAct stipulates that ” when the supplier is located in India and the place of supply is outside India “, shall be treated to be a supply of Goods or Services or both in the course of inter-State trade or commerce.
    Read together it implies that Cross Border Service Provider is required to register irrespective of the quantum of turnover

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