India has become a hub for exporting services in recent times. According to data released by the Ministry of Commerce and Industry, India's total service exports were worth $205.75 billion in 2020. The Goods and Services Tax (GST) system, introduced in 2017, has simplified the taxation process for businesses in India. However, exporters of services need to comply with certain conditions under the IGST Act 2017 to claim a refund of the GST paid on input services.
One such condition is mentioned under Section 2(6)(v) of the IGST Act 2017. This section states that the place of supply of services, in case of export of services, shall be the location of the recipient of services. This means if a business in India exports services to a foreign client, the place of supply shall be the foreign client's location.
Let's understand this with an example. Suppose a software development company in India exports software development services worth ₹10,00,000 to a client in the United States. The software development company has incurred input tax of ₹1,80,000 on various input services such as internet charges, office rent, and legal fees. To claim a refund of this input tax, the software development company needs to comply with the conditions mentioned under Section 2(6)(v) of the IGST Act 2017.
The software development company needs to declare the export of services in its GST return under Table 6A of Form GSTR-1. The details of the export of services need to be mentioned in Table 6A of Form GSTR-1. The software development company also needs to file Form GSTR-3B, which is a monthly summary of outward supplies and input tax credit. In the Form GSTR-3B, the software development company needs to declare the input tax credit available and the tax paid on outward supplies.
Once the software development company files Form GSTR-3B, it can claim a refund of the input tax paid on input services by filing Form GST RFD-01. This form is used to claim a refund of GST paid on input services used in the export of services. The software development company needs to provide details of the export of services and the input tax credit availed in Form GST RFD-01. The refund amount claimed will be credited to the software development company's bank account once the refund application is processed and approved by the GST authorities.
In conclusion, businesses exporting services need to comply with the conditions mentioned under Section 2(6)(v) of the IGST Act 2017 to claim a refund of the GST paid on input services. The process involves filing Form GSTR-1, Form GSTR-3B, and Form GST RFD-01. By complying with these conditions, businesses can claim a refund of the GST paid on input services and reduce their cost of exporting services.
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