Export of goods or services is considered as a zero-rated supply under GST Act and GST will not be levied on export of any kind of goods or services. According to Section 16 of the IGST Act, zero-rated supply means any of the following supplies of goods or services:
(1) Export of goods or services or both;
(2) Supply of goods or services or both to a Special Economic Zone developer
(3) Supply of goods or services or both to a Special Economic Zone unit.
In terms of Schedule II of the CGST Act 2017, development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services.
|Whether the supply of software is goods or services in GST.||
Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services.
But, if a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.
|What is the rate of GST on IT services.||The rate of GST on IT services is 18%.|
|Whether exports of software services attract GST.||
Exports and supplies to SEZ units and SEZ developers are zero-rated in GST. Zero-rating effectively means that no tax is payable on exports but the exporter/supplier is entitled to the input tax credit on inputs/input services used in relation to exports.
The exporters have two options for zero rating, which are as follows:
|What is export of service.||The supply of any service is considered an export of service, where the following conditions are met:
(1) the supplier of service is located in India;
(2) the recipient of service is located outside India;
(3) the place of supply of service is outside India;
(4) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
(5) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with explanation 1 of section 8 of the IGST Act, 2017.
|How to determine the place of supply of software services.||Place of supply of IT/ITES services is the location of the recipient in terms of section 12 and 13 of the IGST Act, 2017. However, if the recipient is not registered and his address is not available on the records of the supplier, the place of supply would be the location of the supplier.|
|How to determine the location of the recipient.||Location of the recipient of service is defined in section 2(14) of the IGST Act. A recipient of services is treated as located outside India if his place of business where he receives services is outside India or, if he does not have a place of business, his usual place of residence is outside India.|
|GST treatment on export of software services.||
Option (1) Supply of software services, under bond or Letter of Undertaking (LTU) without payment of integrated tax, and then claim a refund of unutilised input tax credit.
Option (2) Supply of software services after paying the IGST, can claim refund of such tax paid on the supplied services. The applicant has to apply for the refund as per the conditions specified under section 54 of the CGST Act.
|How to get GST Refund on export of software services.||
As per GST rules, the supplier can claim the input tax credit in respect of goods or services used for export of software services.
To claim GST refund for exports, the taxpayer can export under bond or LUT and claim refund or export on payment of IGST and claim a refund.
Following documents required for claiming refund on export of software services-
1. Copy of return evidencing payment of GST
2. Copy of GST invoice
3. CA certification or self-certification.
GST on import of services use in providing software services.
Import of services liable to pay GST on reverse charge basis. A supply is treated as an import of service if the following conditions are satisfied:
The place of such supply would be taken to be the location where the firm is registered (in GST) and the supplies would attract integrated tax (IGST).
GST on import of database access services from a company abroad over the internet.
|The recipient, if registered, has to pay the applicable IGST on reverse charge basis on import of database access services. If the recipient is not registered, the matter is treated as an online information and database access or retrieval service (OIDAR) and the OIDAR service provider is liable to take registration and pay tax.|
Mode of payment of IGST on reverse charge basis on import of services.
|GST payable on reverse charge basis is to be discharged through cash only.|
|GST Return in case of export of software services.||
(1) GSTR – 1 (Outward Supplies being Software Services)
(2) GSTR – 2A/2B (Inward Supplies)
(3) GSTR – 3 (Monthly Return for netting off Output & Input tax)
(4) GSTR – 9 (Annual return)
(1) GST RFD-01 (Application for Refund)
(2) GST RFD-02 (Acknowledgement)
(3) GST RFD-03 (Deficiency Memo)
(4) GST RFD-04 (Provisional Refund Order)
(6) GST RFD-06 (Refund Sanction/ Rejection Order)