GST export rule changes to cut tax uncertainty, litigation: IT industry
Bengaluru, Oct 8, 2026
The GST Council's changes to export definitions and refund rules are expected to benefit IT firms, consulting companies and GCCs by reducing tax disputes and working capital costs
An Indian company that serves a foreign client through its own branch abroad will get export benefits, the GST Council said, which will include analytics firms, design studios, engineering consultancies and the offices of global companies.
Similarly, work done in India on goods belonging to a foreign client, such as testing, repair, certification, research or processing, will be counted as an export of services even though the goods do not leave the country.
These moves to widen the definition of export of services and ease refund rules are set to benefit Indian information technology (IT), consulting, engineering and other service exporters by making it easier to claim back GST paid on business inputs.
The Council had earlier proposed removing an export condition that stated the supplier and recipient should not be establishments of the same person, and a supply routed through the exporter’s own office fell within that description. “That condition has now been removed. What decides the question now is whether the customer is abroad,” the Council said, a decision that directly affects software services companies such as Tata Consultancy Services (TCS), Infosys and Wipro.
IT industry body Nasscom said the move would positively affect the sector.
“The Council's recommendation to remove this restriction addresses a longstanding concern that Nasscom has raised with the government. Subject to the other export conditions, it should reduce tax uncertainty, litigation, and unnecessary working capital costs,” Nasscom said in a statement.
On the second decision, the beneficiaries will be the global capability centres (GCCs), which have a significant presence in the country and are involved in cutting-edge research and development (R&D) work. It could also help India attract more global research and engineering mandates.
"Allowing export benefits for services delivered through foreign branches is a big relief for the IT and ITeS sector, where refunds were often denied and disputes arose even when contracts were signed by the foreign branch, despite favourable rulings under the earlier law. Aligning export receipts with RBI rules should also help more payment routes qualify for refunds. With 90 percent of refunds now processed automatically for low-risk taxpayers, this will significantly support one of India's largest foreign exchange earning sectors," Abhishek Jain, indirect tax national head and partner, KPMG India, said.
The Council also clarified that for contract manufacturing and processing, India is placed on the same tax footing as competing locations.
On payments and refunds, the government said the timing of when an export payment is counted as received will follow the Reserve Bank of India (RBI) rules so that one standard applies instead of two. It has also facilitated tax refunds for services exporters so that they can recover the tax quickly, as their costs are mainly related to services and equipment.
Ritika Loganey Gupta, partner and GCC tax leader at EY India, said the GST Council’s measures are a positive development for GCCs.
“In particular, allowing input tax credit on employee health and life insurance is important for a sector where talent is the largest investment and employee benefits are an integral part of the operating model. Removing this embedded tax cost is therefore meaningful for GCCs operating at scale. Together with faster refunds and simpler compliance, these measures should help create a more efficient and predictable tax environment as GCCs continue to expand their mandates and operations in India.”
[Business Standard]
