This circular provides clarification on the applicability of condition (v) of section 2(6) of the IGST Act, 2017, which requires that the supplier and recipient of services should not be merely establishments of the same person, for a supply to qualify as export of services.

It clarifies that a company incorporated in India and a foreign company incorporated outside India are treated as separate “persons” under the GST law and are distinct legal entities. Accordingly, an Indian subsidiary, sister concern or group company incorporated in India is not considered to be merely an establishment of its foreign parent or related foreign company.

As a result, supply of services by an Indian incorporated entity to its foreign parent, subsidiary or other related foreign entity will not be hit by condition (v) of section 2(6) of the IGST Act, provided the foreign entity is incorporated outside India. Such supplies can therefore qualify as export of services, subject to fulfilment of the other conditions, including location of recipient, place of supply and receipt of consideration in convertible foreign exchange.

However, the circular reiterates that services supplied between branches, liaison offices or representative offices of the same legal entity located in India and outside India continue to be treated as supplies between establishments of the same person and do not qualify as export of services.

This clarification resolves ambiguity and provides certainty to cross-border service transactions between Indian entities and their foreign group companies.