Is GST Applicable on Sale of Designs Outside India?

In today's globalized economy, businesses frequently engage in cross-border transactions to expand their reach and tap into new markets. One of the most common forms of such transactions is the sale of intellectual property, including designs that are created in one country and sold in another. However, this raises an important question:

whether GST is applicable on the sale of designs outside India?

To answer this question, we need to first understand the legal provisions related to GST and its scope. The GST law in India is governed by the Central Goods and Services Tax Act, 2017, which provides that GST is applicable on the supply of goods and services within the country. However, there are certain exceptions to this rule, and the sale of goods or services that are exported outside India is one of them.

According to the GST law, exports are treated as zero-rated supplies, which means that no GST is levied on them. This is because exports are considered as a means to earn foreign exchange and promote international trade, and therefore, are given certain tax exemptions to encourage such transactions. Consequently, if a design is created in India and sold to a foreign buyer outside India, the transaction would be considered as an export and would not attract GST.

However, there are certain conditions that need to be fulfilled to claim the exemption from GST on exports. Firstly, the goods or services must be physically exported out of India. This means that the goods must cross the international border and be delivered to the buyer outside India. Secondly, the payment for the goods must be received in foreign currency, and the same must be credited to the exporter's bank account. This is to ensure that the transaction is genuine and there is no possibility of revenue leakage.

Now, let's consider a scenario where a design is created in India but sold to a buyer located in another country who intends to use the design within India. In such a case, the transaction would not be considered as an export and would be subject to GST. This is because GST is applicable on the supply of goods or services that are consumed or utilized within the country, regardless of where the buyer is located. Therefore, if the design is intended to be used within India, it would be subject to GST even if the sale is made to a foreign buyer.

In conclusion, whether GST is applicable on the sale of designs outside India depends on the nature of the transaction and the fulfillment of certain conditions. If the design is created in India and sold to a foreign buyer located outside India, the transaction would be considered as an export and would not attract GST. However, if the design is intended to be used within India, the transaction would be subject to GST even if the buyer is located outside India. Therefore, businesses must carefully evaluate their transactions and ensure that they comply with the legal provisions related to GST to avoid any penalties or legal consequences.