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Proposed GST Rules Could Boost India’s Engineering R&D Sector
Some Indian companies do research, testing and engineering work for customers in other countries.
The customer’s sample or prototype may need to be in India while the work is done.
Nasscom says this can make it unclear whether the service counts as an export under GST.
The GST Council has recommended changing the rules about where these services are considered supplied.
If adopted and the conditions are met, some services could count as exports even when the goods are in India.
Nasscom says clearer rules could help businesses avoid tax uncertainty and extra costs.
The recommendations may also help companies doing engineering research and deep-tech work.
They are part of a wider set of GST measures, including proposals about overseas branches and refunds.
Nasscom welcomed proposed changes to GST place-of-supply rules for research and testing services on goods belonging to overseas customers.
Under the treatment described by Nasscom, goods physically present in India can make it difficult for these services to qualify as exports.
The proposed change could allow qualifying services to receive export treatment even when the relevant goods remain in India.
Nasscom said the recommendations could reduce tax uncertainty, litigation and working-capital costs for engineering R&D firms, GCCs and deep-tech start-ups.
Other measures welcomed by Nasscom include export treatment for certain services supplied through overseas branches and changes to refunds.
- Who
- Nasscom and businesses providing research, testing and engineering services to overseas customers.
- What
- Proposed GST place-of-supply changes could allow qualifying services on goods physically present in India to receive export treatment.
- Where
- India, for services performed there for overseas customers.
- When
- The recommendations followed the 57th GST Council meeting; no implementation date is stated.
- Why
- To address uncertainty over export treatment and, according to Nasscom, reduce litigation and working-capital costs.
Key facts
- Industry body
- Nasscom welcomed the recommendations.
- GST Council meeting
- The measures followed the 57th GST Council meeting.
- Services discussed
- Research, testing, certification and engineering performed in India on goods belonging to overseas customers.
- Potential beneficiaries
- Engineering R&D firms, global capability centres and deep-tech start-ups.
- Other export proposal
- Qualifying services supplied through overseas branches could receive export treatment, subject to other export conditions.
- Other measures welcomed
- Faster refund processing, proposed inverted-duty refunds for input services, and refund eligibility for plant and machinery.
- Status
- The article describes recommendations and proposals, not confirmed implemented rules.
Sources
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