The Central Board of Indirect Taxes and Customs vide the Circular No. 161/17/2021-GST dated 20 September 2021 (‘the Circular’) has clarified the interpretation relating to Explanation 1 under Section 8 of the IGST Act, 2017 (‘the IGST Act’) read with condition (v) of export of service under Section 2(6) of the IGST Act.

The key aspects of the Circular are summarised hereinbelow:

• Supply of services by a branch/ agency/ representational office of a foreign company to any establishment of the said foreign company outside India, shall be treated as supply between establishments of distinct person and thereby cannot be treated as “export of services”

• Similarly, any supply of services by an Indian company to its branch/ agency/ representational office outside India shall also be considered as supply between establishments of distinct person and cannot be treated as export of services

• Subsidiary/ sister concern/ group concern (incorporated in India) of any foreign company will be considered as a separate “person” under the provisions of the CGST Act, 2017 and thereby would be considered as separate legal entities (and not merely establishments of a distinct person). Accordingly, any services between such separate legal entities would not be barred by Section 2(6)(v) of the IGST Act for being considered as export of services, as it would not be treated as supply between mere establishments of distinct person under the Explanation 1 of section 8 of IGST Act.