XYZ (India) offering services of product development, analytical method development, partial analytical method validation and technology transfer services to the client’s designated manufacturing site for its Associate Company PQR, Singapore (A separate legal entity). The services will be used by Associate Company in relation to product to be sold in US market. For this purpose, XYZ is raising Debit Note on PQR towards ‘Service charges’ in foreign currency. Is XYZ liable to pay GST on it?
As the POS as per Sec 13 of the IGST Act prima facie appears to be outside India and in case other conditions of S. 2(6) of IGST Act are fulfilled , it would be regarded as export of service and would be a zero rated supply a per Sec 16(1) of the IGST Act.
In such cases the supplier has two options as per Sec 16(3) of IGST Act either to export against LUT / Bond without payment of tax (tax invoice to carry an endorsement to the effect as per Rule 46 of CGST Rules) and avail refund of ITC OR export without LUT with payment and subsequently claim refund of tax paid.
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