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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallNasscom has asked the government to clarify how GST applies to two cross-border services arrangements: services supplied through an overseas branch, and R&D, engineering or testing carried out in India on a prototype or sample provided by a foreign customer. A Press Trust of India report published by Business Standard on October 7, 2026, said the requests were expected before the GST Council’s October 8 meeting. It did not report that the Council had accepted either request or provide the meeting’s outcome.
What are the two GST issues Nasscom raised?
Nasscom’s concerns involve different questions: whether an exporter’s overseas organizational structure affects export treatment, and whether work performed in India on a customer’s physical prototype can qualify as an export when the customer receives and uses the result abroad. These are policy requests reported by PTI, not findings or decisions by the GST Council.
Services supplied through an overseas branch
Nasscom says Indian exporters can serve overseas customers through a foreign branch, and argues that the way a company organizes that presence should not, by itself, determine whether a service supplied from India counts as an export. The report describes a disparity between services routed through overseas branches and those routed through subsidiaries, which Nasscom says can result in input tax credit reversals and additional compliance work. The report does not quantify those effects or settle how the law applies to every branch arrangement.
R&D, engineering or testing on overseas customer prototypes
Nasscom says Indian teams may carry out R&D, engineering or testing in India using a prototype or sample supplied by a customer abroad. Its position is that the customer receives and uses the result overseas, so the service should qualify as an export. In the PTI report, Nasscom characterized current rules as generally treating this work as supplied in India because it is performed there, and denying export treatment. That is Nasscom’s description of the issue, not a legal determination covering every service or prototype.
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What does the law require for a service to count as an export?
Under section 2(6) of the Integrated Goods and Services Tax Act (IGST Act), all five conditions must be met for a supply of service to qualify as an export:
- The supplier of the service is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in Indian rupees where the Reserve Bank of India permits it.
- The supplier and recipient are not merely establishments of a distinct person.
Consequently, having a foreign customer is not enough by itself. The place of supply and the relationship between the supplier and recipient also matter. The 54th GST Council agenda reproduces this statutory framework, but it predates the 2026 change to the intermediary-services rule: 54th GST Council agenda.
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What changed in the place-of-supply rule in 2026?
A separate legal change has already taken effect. The Finance Act 2026 omitted section 13(8)(b) of the IGST Act, the special place-of-supply provision for intermediary services. The GST Council Secretariat says the Finance Act received presidential assent on March 30, 2026, and that the omission came into effect. The Government’s Finance Bill 2026 memorandum explains that, after the omission, the default rule in section 13(2) determines the place of supply for intermediary services.
Under section 13(2), the default place of supply for cross-border services is the recipient’s location, subject to statutory exceptions. The omission is a completed amendment; it is not one of the two unresolved policy requests described in the October report. For the current status, see the GST Council Secretariat’s March 2026 newsletter and the Finance Bill 2026 memorandum. Older material describing the former intermediary rule should not be read as evidence that section 13(8)(b) remains in force.
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What is known about Nasscom’s request—and what remains unsettled?
The PTI report says Nasscom sent a fresh submission to GST authorities on October 5, 2026, after an earlier detailed paper to the Ministry of Finance in October 2025. The text of the October 5 submission was not included in the report, so its precise proposed wording and supporting legal analysis cannot be established from that account.
Ashish Aggarwal, Nasscom’s Vice President and Head of Public Policy, said: “Clarity on this would support competitiveness, release working capital and reduce the litigation the industry has faced over the years.” On prototype work, he said: “The current rules generally treat such a service as supplied in India, where the work is done, and deny it export treatment. The customer receives and uses the result abroad, and the service should qualify as an export.” These are Nasscom’s advocacy statements, not statutory language or an official Council conclusion.
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As of the October 7 report, the Council meeting was scheduled for October 8 and its outcome was not reported. The available account therefore establishes that Nasscom sought clarification, not that the Council adopted either request. The two issues also turn on different facts: the branch-versus-subsidiary structure in one case, and the nature of the prototype-related service, where the work occurs, and where its result is received and used in the other.
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