Circular No. 202/14/2023-GST
F.No. 20/06/22/2023-GST-CBEC
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
******
New Delhi, the 27
th
October, 2023
To
The Pr. Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)
The Principal Directors General / Directors General (All)
Madam / Sir,
Subject: Clarification relating to export of services – sub-clause (iv) of the Section 2 (6)
of the IGST Act 2017–reg.
Various representations have been received requesting for clarification regarding
admissibility of export remittances received in Special INR Vostro account, as permitted by
RBI, for the purpose of consideration of supply of services to qualify as export of services as
per the provisions of clause (6) of section 2 of the Integrated Goods & Services Tax Act,
2017 (herein after referred to as the ‘IGST Act”).
2. The issue has been examined and to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred
by section 168 (1) of the Central Goods & Services Tax Act, 2017 (herein after referred to
as the ‘CGST Act”), hereby clarifies the issue as under:
3. Relevant legal provisions:
3.1 Export of services has been defined under clause (6) of section 2 of IGST Act. As per
the said definition, any supply of services needs to fulfill five conditions for it to qualify as
export of services. Clause (6) of section 2 of the IGST Act is reproduced below for
reference:
“(6) “export of services” means the supply of any service when, –
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service
in convertible foreign exchange or in Indian rupees wherever permitted by the
Reserve Bank of India; and
(v) the supplier of service and the recipient of service are not merely establishments of
a distinct person in accordance with Explanation 1 in section 8;”
3.2 One of the conditions mentioned in sub-clause (iv) of Section 2(6) of the IGST Act is
that the payment for such service has been received by the supplier of service in convertible
foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India.
3.3 Reference is invited to RBI’s A.P. (DIR Series) Circular No.10 dated 11th July,
2022 regarding International Trade Settlement in Indian Rupees (INR), vide which it
has been clarified that to promote growth of global trade with emphasis on exports from India
and to support the increasing interest of global trading community in INR, it has been decided
to put in place an additional arrangement for invoicing, payment, and settlement of
exports / imports in INR. Before putting in place this mechanism, AD banks shall require
prior approval from the Foreign Exchange Department of Reserve Bank of India, Central
Office at Mumbai. Para 3 of the Circular is reproduced below:
“3. In terms of Regulation 7(1) of Foreign Exchange Management (Deposit)
Regulations, 2016, AD banks in India have been permitted to open Rupee Vostro
Accounts. Accordingly, for settlement of trade transactions with any country, AD bank
in India may open Special Rupee Vostro Accounts of correspondent bank/s of the
partner trading country. In order to allow settlement of international trade transactions
through this arrangement, it has been decided that:
(a) Indian importers undertaking imports through this mechanism shall make payment
in INR which shall be credited into the Special Vostro account of the correspondent
bank of the partner country, against the invoices for the supply of goods or services
from the overseas seller /supplier.
(b) Indian exporters, undertaking exports of goods and services through this
mechanism, shall be paid the export proceeds in INR from the balances in the
designated Special Vostro account of the correspondent bank of the partner
country.”
3.4 Reference is also invited to Para 2.52 (d) of chapter related to General Provisions
Regarding Imports and Exports of the Foreign Trade Policy (FTP) 2023, which has come into
force from 01.04.2023, which specifies that:
Para 2.52 (d) Invoicing, payment and settlement of exports and imports is also
permissible in INR subject to compliances as under RBI’s A.P. (DIR Series) Circular
No.10 dated 11th July, 2022. Accordingly, settlement of trade transactions in INR
shall take place through the Special Rupee Vostro Accounts opened by AD banks in
India as permitted under Regulation 7(1) of Foreign Exchange Management (Deposit)
Regulations, 2016, in accordance to the following procedures:
(i) Indian importers undertaking imports through this mechanism shall make
payment in INR which shall be credited into the Special Vostro account of the
correspondent bank of the partner country, against the invoices for the supply of
goods or services from the overseas seller /supplier
(ii) Indian exporters, undertaking exports of goods and services through this
mechanism, shall be paid the export proceeds in INR from the balances in the
designated Special Vostro account of the correspondent bank of the partner
country.
3.5 On perusal of the above, it can be stated that the condition(s) of sub-clause (iv) of
Section 2(6) of the IGST Act, 2017, can be considered to be fulfilled when the Indian
exporters, undertaking exports of services, are paid the export proceeds in INR from the
balances in the designated Special Vostro Account of the correspondent bank of the partner
trading country in terms of Regulation 7(1) of Foreign Exchange Management (Deposit)
Regulations, 2016, as mandated by RBI’s A.P. (DIR Series) Circular No.10 dated 11
th
July,
2022 and reiterated further in Foreign Trade Policy, 2023.
4. Therefore, it is clarified that when the Indian exporters, undertaking export of
services, are paid the export proceeds in INR from the Special Rupee Vostro Accounts of
correspondent bank(s) of the partner trading country, opened by AD banks, the same shall be
considered to be fulfilling the conditions of sub-clause (iv) of clause (6) of section 2 of IGST
Act, 2017, subject to the conditions/ restrictions mentioned in Foreign Trade Policy, 2023 &
extant RBI Circulars and without prejudice to the permissions / approvals, if any, required
under any other law .
5. It is requested that suitable trade notices may be issued to publicize the contents of
this Circular. Difficulty, if any, in the implementation of this Circular may be brought to the
notice of the Board. Hindi version will follow.
(Sanjay Mangal)
Principal Commissioner(GST)
