The Goods and Services Tax (GST) Council on Thursday approved changes to export rules that could benefit Indian information technology companies, consulting firms and global capability centres (GCCs) by simplifying tax refunds and reducing compliance disputes.
The decisions expand export benefits to services provided through Indian companies' overseas branches and certain activities performed in India on goods owned by foreign customers.
Export rule changes offer relief to IT firms
Under the revised approach, services supplied to overseas customers through an Indian company's foreign branch can qualify for export benefits, subject to applicable conditions.
The Council removed the restriction that previously excluded transactions involving establishments of the same person.
The change could benefit major IT exporters, including Tata Consultancy Services (TCS), Infosys and Wipro.
Industry association Nasscom welcomed the decision, saying it addressed a longstanding concern and could reduce litigation, tax uncertainty and working capital pressures.
The Council also aligned the recognition of export payments with Reserve Bank of India (RBI) rules.
GCCs to benefit
The Council also decided to treat testing, repairs, certification, research and processing undertaken in India on foreign-owned goods as exports of services, even when those goods remain in the country.
The measure could strengthen India's attractiveness for international research, engineering and contract manufacturing assignments.
GCCs engaged in research and development are expected to benefit from the expanded eligibility.
Additionally, the Council approved input tax credit (ITC) on employee health and life insurance expenditure.
Combined with quicker refunds and simplified compliance, the measures could reduce embedded tax costs and improve the operating environment for Indian service exporters.
