India’s Goods and Services Tax (GST) Council has recommended changes to export rules that will allow Indian companies to claim export-related benefits when they provide services to foreign customers through their own overseas branches. The decision addresses a longstanding tax issue for information technology (IT), consulting, engineering and other service businesses that operate internationally through offices in multiple countries.
The recommendation was made at the GST Council’s 57th meeting on October 8, 2026. By removing a restriction under the Integrated Goods and Services Tax (IGST) Act, the government aims to reduce tax disputes, improve access to refunds and lower working-capital costs for Indian service exporters. The changes could benefit companies such as Tata Consultancy Services (TCS), Infosys and Wipro, as well as global capability centres and engineering firms.
What Has the GST Council Changed?
The GST Council has recommended removing a condition that prevented certain services from qualifying as exports when the Indian supplier and the overseas recipient were establishments of the same legal person.
Previously, an Indian company providing services through its own foreign branch could face difficulties claiming export status because the Indian office and overseas branch were treated as establishments of the same entity. This could create uncertainty over whether the transaction qualified for export-related GST benefits.
Under the recommended change, the restriction will be removed from the definition of export of services under Section 2(6) of the IGST Act, 2017. This is intended to allow qualifying services supplied to or through overseas branches to receive export treatment, subject to the other applicable conditions.
Key Details of the GST Export Reform
| Particular | Details |
|---|---|
| Main beneficiaries | IT, consulting, engineering and other service exporters |
| Key change | Removal of the same-legal-person restriction |
| Relevant legislation | Section 2(6) of the IGST Act, 2017 |
| Main benefit | Wider access to export-related GST treatment and refunds |
| Additional beneficiaries | Global capability centres and research operations |
| Implementation | Requires the recommended legal changes and applicable guidance |
The change does not automatically make every transaction involving a foreign branch an export. Businesses will still need to meet the remaining legal requirements applicable to export of services.
Why the Existing Rule Created Problems for IT Companies
Indian technology companies frequently operate through overseas offices to serve international customers. An Indian company may develop software, manage data, provide consulting or deliver technical support through its domestic workforce while coordinating with a branch located in another country.
Such structures help companies maintain local relationships with foreign customers, provide services across time zones and meet regional business requirements.
However, the previous GST restriction created a problem when the overseas branch was part of the same legal entity as the Indian supplier. Companies could face disputes over whether services delivered through that branch qualified for export treatment.
The resulting uncertainty could affect the recovery of GST paid on eligible business inputs and leave funds tied up while disputes were resolved.
The GST Council’s recommendation seeks to address this issue by removing the restriction and making export treatment more consistent with the economic nature of the transaction.
How TCS, Infosys and Wipro Could Benefit
Large Indian IT services companies operate extensive international networks. Their business activities include software development, digital transformation, cloud services, engineering, consulting and enterprise technology support.
The new approach could make it easier for qualifying services supplied through overseas branches to receive export-related benefits. This could reduce uncertainty when companies structure contracts, allocate work between offices and manage their international operations.
The potential benefits include:
- Lower working-capital pressure: Eligible GST refunds could reduce the amount of money tied up in tax claims.
- Fewer tax disputes: Clearer rules could reduce disagreements over whether qualifying services count as exports.
- Simpler international operations: Companies may have greater flexibility in organising services delivered through their own overseas establishments.
- Improved tax certainty: Businesses could plan international service arrangements with a clearer understanding of the applicable GST treatment.
The precise financial benefit will depend on each company’s transactions, eligible input taxes and compliance with the remaining export conditions. The reform should therefore not be interpreted as a guaranteed reduction in the overall tax bill of every IT company.
What Does Export Treatment Mean Under GST?
Under India’s GST framework, qualifying exports of goods and services receive zero-rated treatment under the IGST Act.
Zero-rating is important because it can allow eligible exporters to supply goods or services without the ordinary domestic GST burden while also seeking refunds of qualifying input taxes, subject to the applicable conditions and procedures.
For service exporters, the ability to establish that a transaction qualifies as an export can therefore affect both the tax charged on the supply and the recovery of taxes paid on business expenses.
The new recommendation aims to broaden access to these benefits for services supplied through overseas branches. It does not remove the need to satisfy the other applicable export conditions, including the relevant requirements concerning the recipient, place of supply and payment.
GST Relief Also Covers Work on Foreign-Owned Goods
The Council recommended another change that could benefit engineering firms, research organisations and companies providing specialised technical services.
Under the existing provisions, services involving goods that are physically made available by a recipient to a supplier can fall under a special place-of-supply rule. The Council recommended removing the relevant restriction under Section 13(3)(a) of the IGST Act so that the default place-of-supply rule under Section 13(2) can apply in the specified circumstances.
This could help services such as testing, repair, certification, research and processing performed in India on goods belonging to foreign customers qualify for export-related benefits, even when those goods do not leave the country.
For example, an Indian engineering company might test or repair equipment owned by a foreign customer while the equipment remains in India. Under the recommended change, the location of the recipient could become the relevant consideration under the default rule, subject to the applicable conditions.
The measure could make India more attractive for specialised technical work and certain research and development activities.
Foreign Exchange Payment Rules Also Get Attention
The GST Council also recommended issuing a circular to clarify issues involving receipt of export payments in foreign currency or Indian rupees where permitted under Reserve Bank of India rules.
Payment-related interpretations can create uncertainty for exporters, particularly when international transactions use payment arrangements allowed under foreign-exchange regulations.
The proposed clarification aims to align GST export treatment with permitted payment arrangements, giving businesses greater certainty over whether their transactions meet the relevant requirements.
For IT and consulting companies, clearer payment rules could reduce avoidable disputes and simplify compliance for qualifying export transactions.
Why Global Capability Centres Could Benefit
Global capability centres (GCCs) are offshore operations established by multinational companies to handle functions such as software development, analytics, research, engineering and business support.
India has become a major destination for these centres because of its technology workforce and established services ecosystem.
The revised export framework could be relevant to qualifying service arrangements involving foreign establishments, particularly where work is delivered across international offices or performed for overseas customers.
A more predictable tax framework could help companies assess the cost of locating specialised functions in India. It may also support India’s efforts to attract higher-value research, design and engineering activities.
However, the benefits will depend on the precise structure of each operation and the conditions under which its services qualify as exports.
GST Council’s Wider Focus on Export Competitiveness
The export-related changes form part of a broader set of GST process reforms recommended at the Council’s October 2026 meeting.
Other measures include faster processing of eligible refunds, changes to input-tax-credit treatment and steps to simplify registration and compliance. The Council also recommended broader access to refunds for certain input services and plant-and-machinery credits under specified conditions and timelines.
Together, the measures are intended to reduce the amount of tax that remains tied up in business operations and improve predictability for exporters.
For service companies, this is particularly relevant because tax refunds and compliance requirements can affect working capital even when their underlying business activity is internationally competitive.
What Businesses Should Do Next
Companies that supply services through foreign branches should review how the recommended changes could affect their existing arrangements.
They should identify transactions that previously faced export-classification disputes, assess the eligibility of associated input-tax refunds and review their documentation. Businesses should also monitor the final statutory amendments and official guidance before changing their tax treatment.
The recommendation does not mean that all disputed claims will automatically be refunded or that every overseas-branch transaction will qualify. The final implementation details and the facts of individual transactions will remain important.
The Bigger Picture
The GST Council’s decision addresses a structural tax issue for India’s internationally connected services industry. By removing the same-legal-person restriction, the government aims to ensure that qualifying services supplied through overseas branches can receive export-related treatment rather than being disadvantaged solely because the Indian and foreign establishments belong to the same entity.
The reform could improve tax certainty, reduce working-capital pressure and support the competitiveness of Indian IT, consulting and engineering businesses. Its impact will depend on how the legal changes are implemented and how consistently the rules are applied across different types of service exports.
Looking Ahead
The next step is for the recommended changes to be implemented through the necessary legal amendments and supporting guidance. Companies will need to examine the final provisions to determine which transactions qualify, how existing disputes are affected and what documentation is required to support refund claims.
For India’s IT and services sector, the reform could make international operations easier to manage and reduce avoidable tax uncertainty. If implementation delivers the intended clarity, it may also strengthen India’s position as a base for global technology services, consulting, engineering and research activities.
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