Services Supplied to Nepal and Bhutan, GST Applicable or not?

The supply of services, however, to Nepal or Bhutan will be deemed to be export of services only if the payment for such services is received by the supplier in convertible foreign exchange. or Indian rupees but export proceeds shall be realized in freely convertible currency.

It is beyond any contradiction that the provisions under the GST laws have been consistently reworked or modified in order to make them more favourable for different sectors of the economy.

These reforms have altogether eased the burden and complexities of the average taxpayers as well as the tax authorities.

According to section 2(6) of CGST Act-2017, any supply of services shall be considered as ‘export of services’ if ––

• The service provider is situated in India;
• The consumer of service is situated outside India;
• The place of supply of that service is also outside India;
• The consideration for the said service has been got by the supplier of service in terms of convertible foreign exchange; and
• The supplier and place of supply of service are not merely establishments of a different person u/s 8(1) of CGST Act-2017.

Based on above rule, the supplies of services from India to Nepal and Bhutan against the payment in Indian currency does not satisfy the fundamental conditions of ‘export of services’ and hence such supplies to Nepal and Bhutan are not considered as exports. Thus, they are not conducted on a zero-rated basis, i.e. they attract IGST liability.

• Although, the trader and service provider would require to undergo the GST registration and apply for the unique Import Export Code registration if his intent is to provide services to their client situated in Nepal or Bhutan, yet the said trade shan't be considered as export.
• However, as per the government notification 42/2017 dated 27th October 2017 no IGST would be payable on the supply of services from India to Nepal and Bhutan against payment in Indian Rupees.