Export of Services to a Foreign Branch: GST Council Recommends Omitting Section 2(6)(v) of the IGST Act

Among the recommendations of the GST Council at its 57th meeting on 8 October 2026 is a group of changes aimed at exporters, chiefly of services. The most consequential would let an Indian business export services to its own office or branch abroad, which the Integrated Goods and Services Tax Act, 2017 (IGST Act) does not allow today. Others concern the place of supply of services on goods, deliveries to overseas buyers inside an SEZ or FTWZ, the receipt of export proceeds, and the refund rules exporters depend on. What follows takes each in turn, from the release itself.

Like everything else from the meeting, these are recommendations. The release states that they will be given effect through circulars, notifications and law amendments, “which alone shall have the force of law”. Most of the export changes need amendments to the IGST Act, so the present conditions continue to apply until those are enacted.

Services to a foreign branch

Section 2(6) of the IGST Act sets the conditions a supply of services must meet to qualify as an export of services. One of them, in sub-clause (v), is that the supplier and the recipient are not establishments of a distinct person under Explanation 1 to section 8. The Council recommended omitting sub-clause (v) altogether.

The release gives the purpose plainly: it “will facilitate refunds for Indian services providers in respect of services supplied to/through their foreign offices/branches and thus will promote export of services from India”. At present, services supplied by an Indian establishment to its own establishment outside India fail the condition and cannot be treated as exports, whatever the other conditions.

Two points follow for businesses in this position. First, the change operates only from the date of the amendment; the release gives none, and does not suggest retrospective effect. Supplies made before then continue to be judged under the present sub-clause (v). Second, only sub-clause (v) is to go. The remaining conditions of section 2(6) still have to be met for each supply, so the documentation of each supply to a foreign branch continues to matter.

Receipt of export proceeds

The Council also recommended a circular clarifying issues on the receipt of payment in foreign exchange, or in Indian rupees where permissible, for export of goods and services. The release does not say which issues it will address.

Place of supply for services on goods

Clause (a) of section 13(3) of the IGST Act deals with services where goods are made physically available by the recipient of the services to the supplier. The Council recommended omitting it, so that the place of supply for such services is decided by the default provision in section 13(2): the location of the recipient.

The release states that this “will facilitate access to export-related benefits under GST for Indian service providers providing such services to foreign recipients”. For a service provider in India working on goods that a foreign client makes available to it, the place of supply would be the foreign client’s location, which opens the way to treatment as an export where the other conditions are met.

Deliveries to an overseas buyer in an SEZ or FTWZ

An explanation is to be inserted in section 16(1) of the IGST Act. Where goods are supplied to an overseas buyer but delivered to that buyer in an SEZ or FTWZ, and payment is received in convertible foreign exchange or in Indian rupees wherever permitted by the RBI, the supply will be deemed a supply of goods to an SEZ or FTWZ.

The release says this will “provide certainty regarding zero rating benefit” for Indian manufacturers delivering to overseas buyers in an SEZ or FTWZ for warehousing or further processing. The payment condition is part of the explanation, so the mode of receipt will decide whether the deeming applies.

Refund rules that affect exporters

Several of the refund recommendations bear on exporters in particular:

• Provisional refund: in phase 1 of system-based processing, 90% of the amount claimed on zero-rated supplies is to be sanctioned provisionally by the system, on its evaluation of risk. In phase 2, the full refund on zero-rated supplies is to be sanctioned by the system after adjusting pending dues.
• Rule 89(4)(C): the restriction limiting the turnover of zero-rated supply of goods to 1.5 times the value of like goods supplied domestically is to be removed.
• RFD-01: claims on zero-rated supplies are to be filed in a system-readable format without scanned documents.
• Capital goods: refund of accumulated ITC on capital goods is to be allowed in refunds on zero-rated supplies, spread over 60 months, for ITC availed on capital goods on or after 1 April 2027.
• Rule 96(10): the Council recommended its omission with effect from 23 October 2017, “in accordance with the Hon’ble Supreme Court decision”. The release does not name the decision.

The rule 96(10) item is the only one in this group with a retrospective date. Exporters affected by that sub-rule should watch for the notification and the circular that accompanies it.

Related changes for cross-border services

Three further recommendations touch cross-border transactions:

• transfer of title in intellectual property rights, whether temporary or permanent, is to be treated uniformly as a supply of services under Schedule II of the CGST Act, which the release says will facilitate cross-border transactions involving IPR;
• e-invoicing is to be extended to import of services, among other supplies, for taxpayers with aggregate annual turnover of ₹ 5 crore and above;
• import of services without consideration by the Indian establishment of a foreign shipping company from a related person or its establishment outside India is to be exempted, with the past period regularised on an “as is where is” basis.

Until the amendments

The present law continues to decide current supplies. Services to a foreign branch remain outside export of services while sub-clause (v) stands, and the place of supply for services on goods made available by a foreign client remains governed by section 13(3)(a) as it reads today. The dates in this group that the release does give are 1 April 2027 for capital goods ITC and 23 October 2017 for the omission of rule 96(10).

This article is intended for educational purposes only and should not be construed as professional advice. It is based on the law as understood on the date of publication; laws and regulations are subject to change, and it may not reflect later developments. Readers are advised to consult a qualified tax professional on their specific situation before taking any action based on it. CA. Mohit Gaba takes no responsibility for any action taken or decision made on the basis of this article.