Export of services: the five conditions and where claims fail
All five must be satisfied. Refund claims are refused on the one nobody documented.
Under Section 2(6) of the IGST Act an export of services requires five conditions: the supplier is located in India, the recipient is located outside India, the place of supply is outside India, the payment is received in convertible foreign exchange or in Indian rupees where permitted by the Reserve Bank of India, and the supplier and recipient are not merely establishments of a distinct person. Failure on any one condition makes the supply domestic, with tax, interest and a refund that cannot be claimed.
The five conditions, and the evidence for each
Supplier in India: established by the registration itself.
Recipient outside India: established by the contract, the invoice, and evidence of the recipient's place of business. Where the recipient has an Indian presence, the contract must show which establishment received the service.
Place of supply outside India: determined under Section 13. This is where intermediary characterisation destroys claims, and where performance based services under Section 13(3) fail.
Payment in convertible foreign exchange, or in Indian rupees where permitted: established by the foreign inward remittance certificate or the bank realisation statement, indexed to invoices. This is the most common documentary gap.
Not merely establishments of a distinct person: an Indian branch supplying to its own foreign head office is not an export, because Section 8 and the explanation to Section 13 treat them as establishments of a distinct person. A subsidiary supplying to its parent is a different case and can be an export.
The characterisation traps
Intermediary services under Section 13(8)(b), where the place of supply is the supplier's location. A commission agent for a foreign principal fails the third condition. Circular 159/15/2021-GST sets out the ingredients and confirms that a person supplying on a principal to principal basis is not an intermediary.
Performance based services under Section 13(3), where goods are physically made available in India or the recipient's physical presence is required. Testing, repair and certain training services fall here.
Immovable property related services under Section 13(4), which follow the property.
Services in relation to an event in India under Section 13(5).
Where the service is rendered to a foreign entity but consumed by its Indian customers, the department contends the recipient is in India. The contract must identify the recipient and the deliverable.
The file every exporter of services should keep
The master services agreement or the purchase order from the foreign recipient, with the scope described as a service rendered to the recipient.
The invoice, in convertible currency, describing the service consistently with the contract.
The remittance certificate or bank statement, indexed to the invoice.
The deliverable itself, or evidence of it, and any correspondence establishing that the recipient received the service.
A note establishing that the supplier acts on its own account, addressed to the intermediary risk, where the service involves any interaction with third parties.
Authorities relied on
A service provider performing services on a principal to principal basis under a master services agreement is not an intermediary, and refund cannot be denied on that ground.
Set out the ingredients of an intermediary — a minimum of three parties, two supplies, arrangement or facilitation, and absence of supply on one's own account — and clarified that sub contracting is not intermediation.
What to do on Monday
Test every export service line against all five conditions in writing, and re test when the contract changes.
Index remittance certificates to invoices as they are received, not at refund time.
Address the intermediary risk in the contract language for any service touching third parties.
Identify the contracting establishment expressly where the recipient has an Indian presence.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Is an Indian branch's supply to its foreign head office an export?
No. They are establishments of a distinct person and the fifth condition fails.
Can payment be received in Indian rupees?
Only where permitted by the Reserve Bank of India, as in certain arrangements with specified countries. Keep the bank's confirmation.
What if the foreign recipient has an Indian subsidiary?
The contract must establish which entity received the service. Where the Indian entity received it, the supply is domestic.
Does a sub contract to an Indian vendor affect our export?
No. Sub contracting does not make you an intermediary, per the circular. Keep the sub contract on a principal to principal basis.
How long do we have to receive payment?
The condition is receipt in convertible foreign exchange; the foreign exchange law prescribes the realisation period and any extension. Track it.
In this cluster
- Place of supply under GST: the full decision tree
- Intermediary services: characterisation, exposure and structuring
- Dharmendra M. Jani: the constitutional attack on intermediary taxation, and where it stands
- Mohit Minerals: ocean freight, composite supply, and the sentence that changed GST federalism
- Import of services and reverse charge under Section 5(3) of the IGST Act
- OIDAR services: registration, compliance and the 2023 amendment
- Bill to ship to transactions and Section 10(1)(b)
- High seas sales, bonded warehouse transfers and Schedule III
- Merchant trade and out and out supplies
- Goods transport agencies: reverse charge, the rate option and place of supply
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.