A service between an Indian office and an overseas branch or head office of the same legal person is not an export of services under India’s GST law. The law treats the two establishments as distinct persons, and the export definition requires that the supplier and recipient not merely be establishments of the same person. A separately incorporated Indian subsidiary is different: it is a separate person from its foreign parent, so it may qualify as an exporter if it meets every other statutory condition.
Does a service between an Indian branch and its overseas head office qualify as an export?
No, not when the Indian office and overseas head office are establishments of the same legal person. The same rule applies in the other direction: a service between an Indian head office and that company’s overseas branch does not meet the export definition.
Explanation 1 to section 8 of the Integrated Goods and Services Tax Act (IGST Act) treats establishments of the same person in India and abroad as establishments of distinct persons. Explanation 2 addresses a person carrying on business through a branch or agency in a territory. Together, these provisions mean that a cross-border service between such establishments is not treated as a service between an Indian supplier and an unrelated foreign recipient for export-condition purposes.
CBIC Circular 161/17/2021-GST, dated 20 September 2021, clarifies this treatment for both a foreign company’s Indian branch and an Indian company’s overseas branch. The relevant distinction is legal identity—not simply whether the service crosses a national border, is billed in foreign currency, or benefits an overseas office.
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How is a subsidiary different from a branch?
A subsidiary incorporated as a separate company is a different legal person from its foreign parent. Condition (v) of the export definition therefore does not, by itself, prevent an Indian subsidiary from exporting a service to its overseas parent. The subsidiary must still satisfy the other export conditions, including the recipient-location, place-of-supply and payment requirements. Circular 161/17/2021-GST makes this distinction between separately incorporated companies and establishments of the same person.
| Arrangement | Legal relationship | Effect of export condition (v) |
|---|---|---|
| Indian branch and its foreign head office | Establishments of the same legal person | Does not qualify as an export of services |
| Indian head office and its overseas branch | Establishments of the same legal person | Does not qualify as an export of services |
| Indian subsidiary and foreign parent | Separate incorporated legal persons | Condition (v) does not itself bar export treatment; all other conditions still apply |
What are the five conditions for an export of services?
Section 2(6) of the IGST Act sets out five cumulative conditions. A supply must satisfy all five to qualify as an export; meeting only the foreign-recipient or payment condition is not enough.
- The supplier of the service is located in India.
- The recipient of the service is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in Indian rupees wherever permitted by the Reserve Bank of India (RBI).
- The supplier and recipient are not merely establishments of a distinct person under Explanation 1 to section 8 of the IGST Act.
For a same-person head-office/branch service, the fifth condition is the decisive obstacle. For a separately incorporated subsidiary supplying its parent, the remaining conditions still need to be checked on the facts and for the relevant transaction period.
How does place of supply affect cross-border services?
For services supplied across borders, section 13 of the IGST Act generally places the supply at the recipient’s location, but it contains exceptions. One important exception is intermediary services: under section 13(8), the place of supply is the supplier’s location. If that location is in India, the place-of-supply condition for export may not be met.
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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 is not an intermediary merely because it is a head office, supports an affiliated entity, or communicates with customers. The service and the parties’ roles must be examined to identify the recipient and the applicable place-of-supply rule.
What GST issues arise between head offices and branches in different Indian States?
Domestic head-office/branch transactions are a separate issue from exports. Registrations of the same organization in different Indian States may be treated as distinct persons under section 25 of the Central Goods and Services Tax Act (CGST Act). That can raise questions about supply, invoicing, input tax credit (ITC) and valuation; it does not make the transaction an export.
CBIC Circular 199/11/2023-GST, dated 17 July 2023, addresses head offices and branches in different States. It distinguishes third-party services procured for branches from services generated internally by the head office:
- Common third-party input services: For services procured by the head office and attributable to one or more branches, the circular describes distribution of credit through the Input Service Distributor (ISD) mechanism or issuance of tax invoices to the relevant branches, subject to statutory ITC conditions and the service actually being attributable or provided to the branch. The head office needs ISD registration to use the ISD route. The applicable statutory provisions for the period should be checked before choosing a route.
- Internally generated services: For valuation under Rule 28, the circular says that where the recipient branch is eligible for full ITC, the value declared on the invoice is deemed to be the open market value, even if a cost component such as employee cost is not included. Where no invoice is issued and the branch has full ITC, the circular says the value may be deemed nil. It also states that head-office employee salary cost is not mandatorily required to be included in the taxable value of internally generated services, including where the branch does not have full ITC.
Circular 199/11/2023-GST reflects the law and guidance addressed on 17 July 2023. Check the applicable rules, amendments and facts for the tax period in question rather than assuming that the circular alone resolves every valuation or credit issue.
Does payment in Indian rupees make a branch transaction an export?
No. The export definition allows payment in Indian rupees wherever RBI permits, as well as payment in convertible foreign exchange. That addresses the payment condition only; it does not override the distinct-establishments exclusion or cure a place of supply in India.
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CBIC Circular 88/07/2019-GST discusses INR realization under applicable RBI rules and says LUT treatment is permissible for covered supplies irrespective of whether payment is in INR or foreign currency, when RBI guidelines are met. Circular 165/21/2021-GST also refers to payment in foreign exchange or INR wherever RBI permits, while noting that the payment channel does not establish export treatment if the place of supply is in India. Confirm the RBI permission and documentation applicable to the particular payment and period.
What export treatment follows if all conditions are met?
A qualifying export is zero-rated under section 16 of the IGST Act. The statutory routes described there include supplying under a bond or Letter of Undertaking (LUT) without payment of IGST and claiming a refund of eligible unutilized ITC, or paying IGST and claiming a refund under the applicable statutory provisions and rules. These are routes for a supply that already qualifies as an export; they do not convert a same-person branch/head-office service into one.
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What should be checked before classifying the transaction?
- Confirm whether the parties are two establishments of the same legal person or separately incorporated entities.
- Identify the actual recipient and the establishment most directly concerned with receiving the service.
- Describe the service performed and assess the applicable place-of-supply rule, including any intermediary-services exception.
- Check whether the payment method and currency are permitted under RBI rules for the transaction.
- For domestic cross-State registrations, separately assess supply, invoicing, ITC distribution and valuation under the rules applicable to that tax period.
- Use the amended statute, rules and applicable CBIC guidance in force for the relevant period; the cited circulars are dated 2021 and 2023 and may need to be read with later amendments.
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