GST on Sourcing Services to Foreign Entities: Haryana AAR Ruling
Haryana AAR held sourcing services are taxable at 18% GST, but cannot rule on zero-rated export status.
- Ruling
- ADVANCE RULING NO.HAR/HAAR/R/2018-19/6 dated 11.04.2018
- Dated
- 11 Apr 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Esprit India asked if sourcing services for foreign affiliates qualify as export.
- Authority ruled sourcing support services attract 18% Goods and Services Tax.
- Authority refused to decide export status due to lack of legal jurisdiction.
- Advance ruling authorities cannot determine the place of supply for transactions.
In short
Esprit India provided sourcing, vendor research, and quality control services in India for its Hong Kong group company. The company asked the Haryana Authority for Advance Ruling (AAR) if its services qualify as an export of services with zero GST and if it could claim a GST refund on inputs. The authority classified the services as taxable at 18% GST but stated it did not have the legal power to decide if the service qualifies as an export.
What has changed
How it worked before
Businesses providing back-office, sourcing, and quality check support to foreign parent companies often assumed these activities automatically counted as zero-rated exports of services. Many expected advance ruling authorities to confirm whether their international arrangements qualified for GST refunds.
What has changed
The authority classified sourcing support, market research, and quality control activities as taxable services under forward charge at 18% GST under Order HAR/HAAR/R/2017-18/6. More importantly, it ruled that the Authority for Advance Ruling has no legal power under Section 97(2) of the CGST Act to decide the place of supply. Because export status depends entirely on the place of supply, tax authorities in advance rulings will not confirm whether your service is a tax-free export or eligible for an input tax credit refund.
Who this affects
Indian subsidiaries, sub-contractors, and liaison agencies providing sourcing support, vendor identification, market research, or quality control services to foreign group entities.
An example
XYZ Sourcing India provides supplier research and quality checks for its parent company in Germany. XYZ wants to know if it can avoid charging 18% GST by treating its work as a zero-rated export of services. Based on Order HAR/HAAR/R/2017-18/6, the Haryana AAR would classify the underlying services as taxable at 18% GST. However, the authority would refuse to answer whether the service qualifies as an export, leaving XYZ to determine its place of supply through regular tax assessment channels.
What you should do
Remember that an advance ruling applies only to the company that asked for it and its specific local tax office. If your business provides similar support services to foreign companies, do not rely on this ruling as a final answer for your export status. You should consult a tax consultant to evaluate place of supply rules for your specific contract structure.
If you do nothing
If you assume an advance ruling authority can confirm your export status and zero-rated GST benefits, you may be unprepared when your local tax officer reviews your claims. A tax officer could reject your input tax credit refund or demand 18% GST on past payments made to foreign clients. This can lead to heavy interest charges and penalties for unpaid tax duties.
The terms explained
- input tax credit
- The GST you pay on your business purchases that you can reduce from the GST you collect on your sales.
- place of supply
- The legal location where a service is considered delivered under GST law to decide if tax applies.
- export of services
- Supplying a service from India to a buyer outside India under conditions that make it eligible for zero GST.
- zero rated
- A transaction where no GST is charged on the final sale and the seller can claim refunds on inputs.
The ruling in detail
Authority for Advance Ruling
M/s Esprit India Private Limited
ADVANCE RULING NO.HAR/HAAR/R/2018-19/6 dated 11.04.2018 · Haryana
Questions before the authority
- Taxability of above stated services provided by Esprit India to its associate concern in Hong Kong EDCFE under GST regime.
- Whether the above stated services provided by Esprit India are covered under Export of Services having Zero rated taxability.
- Whether Esprit India is eligible for seeking refund of GST for the taxes paid on input services or goods or both.
Facts
The applicant, M/s Esprit India Private Limited, acts as a sub-contractor for its Hong Kong affiliate, M/s Esprit De Corp. (Far East) Limited (EDCFE), providing sourcing support services in India for Esprit Europe Service GmbH, Germany. These activities include market research, supplier identification, negotiation, inspection/quality control, and logistics coordination. The applicant sought an advance ruling on the GST taxability of these services, whether they qualify as zero-rated export of services, and whether it can claim a refund of input tax credit.
Ruling
| Question | What the authority ruled |
|---|---|
| Taxability of sourcing support services provided to foreign affiliate | Taxable @ 18% under forward charge Classified under SAC 998371, 998599, and 998311 |
| Qualification of services as zero-rated export of services | No ruling due to lack of jurisdiction Place of supply determination is outside the scope of Section 97(2) |
| Eligibility for refund of GST paid on inputs/input services | No ruling due to lack of jurisdiction Dependent on the place of supply and export service determination |
The Authority held that the sourcing support services provided by the applicant to its foreign affiliate qualify as **taxable services** under forward charge at 18% GST. However, the Authority declined to rule on whether the services qualify as an export of services or whether the applicant is eligible for input tax refund, citing a **lack of jurisdiction** over place of supply determinations.
Reasoning
The Authority evaluated the listed activities and classified market research under SAC 998371, vendor support/identification under SAC 998599, and quality control/logistics under SAC 998311, finding them all liable to 18% GST under Notification No. 11/2017-Central Tax (Rate). Regarding export of services under Section 2(6) and zero-rating under Section 16(1) of the IGST Act, the determination hinges on whether the place of supply is outside India. Since Section 97(2) of the CGST/HGST Act does not confer authority on the AAR to decide the **place of supply**, the Authority ruled that it lacks jurisdiction to pronounce upon export status or consequential tax refunds.
Provisions relied on
- Section 97(2) of CGST/HGST Act, 2017
- Section 98 of CGST/HGST Act, 2017
- Section 2(6) of IGST Act, 2017
- Section 16(1) of IGST Act, 2017
- Notification No. 11/2017-Central Tax (Rate)
For the practitioner
This ruling highlights that liaison and back-office sourcing support services provided to foreign group entities attract forward charge GST at 18%. Crucially, it confirms that the AAR cannot decide whether a transaction constitutes an **export of services** because determining the **place of supply** falls outside the statutory jurisdiction of advance rulings under Section 97(2) of the CGST Act.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/haryana-ar_06_2018-19_dt.11.04.18_eipl.pdf
Legibility of the scan, as read: high.
Prepared 17-10-2026.
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