GST on IT services provided to foreign clients: TN/12/AAR/2023
The Authority for Advance Ruling confirmed that IT services provided to a foreign client qualify as a zero-rated export of services.
- Ruling
- Advance Ruling No. 12/AAR/2023 Dated: 06.06.2023
- 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
- Luksha Consulting asked if monitoring software for UK clients is an export.
- The Authority ruled these services qualify as an export of services.
- The supply is classified as a zero-rated supply under the IGST Act.
In short
The company asked if their software monitoring work for clients in the UK counts as an export of services under the Goods and Services Tax (GST) law. Because they receive payment in foreign currency and the entities are legally separate, the Authority confirmed this is an export.
What has changed
How it worked before
Businesses were often uncertain if services provided to foreign parent companies or related entities would be treated as exports or as local services subject to GST.
What has changed
The ruling clarifies that if an Indian company and its foreign client are separate legal entities, their services qualify as an export. This means the company does not need to charge GST on these invoices, provided all legal conditions for an export are met.
Who this affects
Indian IT companies and service providers that perform work for clients located outside of India.
An example
Imagine a software firm in Bangalore that maintains apps for a client in Germany. They receive payment in Euros and are not the same legal entity as the German client. Based on this ruling, they can treat their service as a zero-rated export and avoid charging GST, provided they meet all other export criteria.
What you should do
If your business model is similar, you may use this logic to support your tax position. However, an Advance Ruling only binds the specific company that asked and its local tax office; it is not a general law that applies to everyone automatically.
If you do nothing
If you assume this ruling automatically applies to you and stop charging GST without meeting all legal requirements, your local tax officer may disagree. You could face demands for unpaid tax, interest, and penalties if your specific arrangement does not perfectly match the conditions of an export.
The terms explained
- Export of services
- A service provided from India to a recipient located outside India where the payment is received in foreign currency.
- Zero-rated supply
- A supply of goods or services that is taxed at a rate of zero percent, allowing the business to claim back taxes paid on their own inputs.
- IGST Act
- The Integrated Goods and Services Tax Act, which governs the tax on supplies made between different states or between India and other countries.
The ruling in detail
Authority for Advance Ruling
M/s. Luksha Consulting Private Limited
Advance Ruling No. 12/AAR/2023 Dated: 06.06.2023 · Tamil Nadu
Questions before the authority
- Is GST applicable for monitoring the software application contract outside India?
- Whether IGST is applicable for the above export online monitoring software contract work and if applicable rate of GST.
Facts
The applicant is an Indian private limited company providing information technology enabled services, specifically monitoring and updating customer applications for clients located in the UK. The applicant receives payment for these services in foreign currency. The applicant sought a ruling on whether these services qualify as an export of service under the GST Act.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of GST/IGST on export of software monitoring services | Qualifies as export of services and is a zero rated supply Subject to fulfillment of conditions under section 2(6) of the IGST Act |
The Authority ruled that the services rendered by the applicant to the foreign recipient qualify as an **export of services**. Consequently, the supply is considered a **zero rated supply** under the IGST Act.
Reasoning
The Authority analyzed the conditions for export of services under section 2(6) of the IGST Act, 2017. It determined that the applicant and the foreign recipient are not merely establishments of a distinct person, as they are separate legal entities incorporated under different jurisdictions. The Authority relied on the definition of person and company under the Companies Act and the CGST Act to establish that the Indian subsidiary and the foreign parent are distinct persons. Therefore, the transaction satisfies all criteria for an export of service, including the receipt of payment in convertible foreign exchange.
Provisions relied on
- Section 2(6) of the IGST Act, 2017
- Section 8 of the IGST Act, 2017
- Section 13(2) of the IGST Act, 2017
- Section 16(1)(a) of the IGST Act, 2017
- Section 97(2) of the CGST Act, 2017
For the practitioner
This ruling confirms that an Indian subsidiary providing IT services to a foreign parent company can qualify as an **export of service** provided they are distinct legal entities and not merely establishments of the same person. It provides clarity for Indian service providers with foreign group entities regarding their tax liability. However, it does not override the necessity of strictly satisfying all five conditions stipulated in section 2(6) of the IGST 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/12_aar_2023luksha.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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