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A foreign customer does not automatically make an Indian pharma or clinical-research supply an export of services under GST. Export treatment requires all five conditions in section 2(6) of the Integrated Goods and Services Tax (IGST) Act, including a place of supply outside India. For research, testing and CRO work, the decisive question is often whether section 13(3)(a) places the supply where work is performed in India because the client’s samples or other goods were made physically available there.
Use the statutory checklist below for each contract and service line. Also separate a company’s own CRO or R&D service from an intermediary arrangement, and verify whether any proposed 2026 amendment has actually commenced before changing your position.
Start with the five cumulative conditions in section 2(6)
Section 2(6) defines “export of services” as a supply meeting five conditions at the same time. A foreign contract, overseas customer, or receipt in foreign currency proves only one part of the fact pattern; it does not settle GST treatment. Test every distinct service, legal entity and contract rather than classifying an entire group’s activity with one label.
| Statutory condition | What to establish in practice | Typical failure point |
|---|---|---|
| Supplier is located in India | Identify the GST-registered Indian entity that actually supplies the service and issues the invoice. | A group describes an Indian project team as an overseas supply even though the contracting supplier is the Indian company. |
| Recipient is located outside India | Confirm the contractual recipient’s legal identity, establishment and GST treatment. Review affiliates, branches and fixed establishments. | The paying foreign company is not necessarily the recipient of every service in a multi-party CRO chain. |
| Place of supply is outside India | Apply section 13 of the IGST Act to the actual service, including the rules for goods physically made available and for intermediaries. | Work is performed in India on client-provided samples, triggering a special rule rather than the recipient-location default. |
| Payment is received in convertible foreign exchange, or in Indian rupees where permitted by the Reserve Bank of India | Keep bank and remittance evidence and verify that the rupee route falls within an RBI-permitted case. | Assuming any INR receipt qualifies without checking the applicable RBI permission and documentation. |
| Supplier and recipient are not merely establishments of a distinct person | Map branches, offices and other establishments under the IGST Act and determine whether the parties are treated as distinct persons. | Calling a foreign branch a customer when the legal relationship is between establishments of the same person. |
Failure of any one condition means the supply does not meet the statutory definition of export of services. Zero-rating consequences should therefore follow only after the complete test, not from the customer’s country or the currency shown on a purchase order.
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Why place of supply is difficult for pharma and CRO work
Section 13(2) generally places a cross-border service at the recipient’s location. Section 13(3)(a), however, has provided a special rule for services supplied in respect of goods that the recipient must make physically available to the supplier (or to a person acting on the recipient’s behalf). Under that rule, the place of supply is generally where the service is actually performed. The Act separately assigns intermediary services to the supplier’s location. Consequently, identify the service and the applicable rule before treating the place as outside India.
Services that may involve physically available samples or materials
Pharma and clinical-research projects can involve reference standards, biological samples, formulations, test articles, devices or other materials supplied by an overseas sponsor. The GST Council’s 37th-meeting agenda discussed this physical-availability issue in relation to pharmaceutical R&D carried out in India. Examples listed there included:
- integrated discovery and development;
- processing and testing;
- in-vivo and assay evaluation;
- drug metabolism and pharmacokinetics research;
- safety assessment and toxicology;
- analytical testing;
- bioequivalence and bioavailability studies; and
- clinical trials.
The agenda records a policy question; it is not itself a change to the Act and does not decide every CRO’s facts. For each work package, document what material was supplied, by whom, to whom it was made available, where the work occurred and whether the service is genuinely “in respect of” that material.
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A practical place-of-supply decision sequence
- Describe the deliverable. Write a plain-language description such as analytical testing, protocol design, patient-site coordination, data management, regulatory support or a bundled R&D programme. Avoid relying only on “research services” in the invoice.
- List all goods and samples. Record reference materials, test articles, biological samples, devices and data-bearing media. State whether the sponsor or another person made each item physically available in India.
- Separate workstreams. A contract may contain laboratory testing on supplied samples, statistical analysis, study management and advice. Assess whether one principal supply exists or whether separate supplies have different place-of-supply rules.
- Apply section 13(3)(a) where its facts fit. If the service is in respect of goods that had to be made physically available in India, evaluate the actual-performance rule and retain evidence of the location of performance.
- Apply the default only after exclusions. If no special rule applies, section 13(2)’s recipient-location rule may place the supply outside India when the recipient is genuinely abroad.
- Check intermediary treatment separately. A service that arranges another supplier’s supply can be governed by the intermediary rule even when the end client is overseas.
Own-account CRO services versus intermediary services
Section 2(13) defines an intermediary around arranging or facilitating a supply between two or more persons, while excluding a person that supplies the relevant goods or services on its own account. CBIC Circular 107/26/2019-GST states that the answer depends on the facts and circumstances and on the principal or main supply.
Map the entire contracting chain
For a clinical study, draw the chain from sponsor to foreign affiliate, Indian CRO, investigators, hospitals or sites and subcontractors. For every relationship, record:
- which legal entity signs the contract;
- which entity is named as recipient and pays;
- who performs the scientific, operational or administrative work;
- whether the Indian company assumes responsibility for its own deliverable; and
- whether it merely introduces, coordinates or facilitates another person’s supply.
An Indian CRO that undertakes protocol execution, monitoring, data management and reporting on its own account has a different analysis from an entity that only connects a foreign sponsor with investigators and earns a facilitation fee. Labels such as “commission,” “coordination” or “project management” are not conclusive; the contract, statements of work, personnel responsibilities and invoices must be read together.
What advance rulings and policy records do—and do not—prove
GST Council records identify advance-ruling proceedings involving clinical research for foreign clients, including Asiatic Clinical Research Private Limited in Karnataka and Cliantha Research Limited in Maharashtra. These proceedings show that the interaction among clinical work, samples, contractual parties and place of supply has arisen in concrete cases. An advance ruling is fact-specific and should not be generalized into a blanket result for every CRO, laboratory or pharma company.
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The Council’s 37th-meeting agenda also reproduced an Association of Biotechnology Led Enterprises submission estimating an annual impact of ₹170 crore. That figure is an industry-submitted estimate in a policy proposal, not an independently validated government statistic. It can explain why the issue appeared on the policy agenda, but it does not establish eligibility for an individual taxpayer.
Check the status of the proposed 2026 change before relying on it
A PIB FAQ posted on 9 October 2026 says the government intends to omit section 13(3)(a). The stated objective is to bring services such as testing, repair, R&D and clinical trials under section 13(2)’s recipient-location default rule. The FAQ describes an intended policy effect; the available record does not establish that an amendment has passed, received assent, been published in the Gazette or commenced.
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Before applying a changed rule to a current invoice or refund claim, verify all three legal milestones:
- the enacted amendment text;
- its Gazette publication and any required assent; and
- the notified commencement date, including whether different provisions commence on different dates.
Until those checks confirm an operative amendment, analyze supplies under the law actually in force. For periods that straddle a commencement date, preserve the contract, performance and invoicing timeline so each supply can be tested under the correct version of section 13.
A defensible GST eligibility workflow
- Identify the supply and supplier. Break a master agreement into services and work orders. Name the Indian legal entity responsible for each deliverable.
- Confirm the recipient. Verify the foreign customer’s legal name, establishment and contracting role. Check whether an Indian branch, affiliate or site is the actual recipient or a distinct person.
- Map performance locations. List laboratories, investigator sites, warehouses, data centres and offices where material parts of the service occur.
- Inventory supplied goods. Record samples and other goods, the party making them available, dates of receipt and return or destruction, and the work performed on them.
- Classify the supply. Decide whether the Indian company supplies its own service or arranges another person’s supply. Obtain legal and operational sign-off where the answer is mixed.
- Apply the place-of-supply rule in force. Test section 13(3)(a), section 13(2), the intermediary rule and any other specific provision relevant to the service.
- Verify payment. Match invoices to bank statements, foreign-exchange realization evidence and any RBI permission supporting an INR receipt.
- Check distinct-person status. Compare the contracting parties with the group’s branches and establishments under the IGST Act.
- Set the supply period. Note the tax point, invoice date, performance period and any amendment commencement date that could affect the analysis.
- Assemble the file. Keep the contract, statement of work, sample logs, site records, correspondence describing responsibilities, invoices, remittance records and the place-of-supply memorandum together.
Invoices, bonds and refund records
Once a supply has passed the export test, apply the current zero-rating and procedural rules that fit the taxpayer’s chosen route. CBIC’s invoice rules provide export-related endorsements, including “Supply meant for export on payment of IGST” and “Supply meant for export under bond or letter of undertaking without payment of IGST,” as applicable. Use the wording and particulars prescribed for the relevant period rather than copying an old template.
For exports without payment under a bond or letter of undertaking, CBIC’s refund rules describe export-turnover calculations for services. Preserve the records used to calculate turnover, net tax and eligible refund, and reconcile them with invoices and realization evidence. Filing mechanics, eligibility and available options depend on the current rules and the taxpayer’s facts; an invoice endorsement alone cannot cure a failed place-of-supply or recipient test.
Compare common service arrangements before choosing a treatment
| Arrangement | Key factual question | Issue requiring resolution |
|---|---|---|
| Indian CRO performs laboratory testing on sponsor-provided samples in India | Were the samples physically made available for the service, and is the testing in respect of those goods? | Evaluate section 13(3)(a) as it stands for the relevant period before relying on recipient location. |
| Indian CRO designs protocol, analyses data and delivers reports to a foreign sponsor without client goods being made available | What is the principal service and where is the recipient located? | Section 13(2) may be relevant, subject to all five section 2(6) conditions and any other specific rule. |
| Indian coordinator introduces investigators to a foreign sponsor | Does the coordinator supply its own substantive service or arrange another person’s supply? | Assess intermediary characterization and the resulting place-of-supply rule. |
| Indian entity performs work for a foreign group branch | Are supplier and recipient establishments of the same person? | The distinct-person condition may prevent export treatment even when work and payment are cross-border. |
Frequent errors and how to correct them
- “The customer is foreign, so it is an export.” Correct it by completing the five-condition checklist and retaining evidence for each item.
- “Payment arrived in dollars, so place of supply is abroad.” Currency addresses only the payment condition; it does not override section 13.
- “All clinical research is covered by one rule.” Separate testing on supplied samples, study management, data work and facilitation activities.
- “A foreign affiliate is an unrelated recipient.” Review branches and establishments for distinct-person treatment before issuing zero-rated invoices.
- “The 2026 PIB FAQ already changed the law.” Confirm enacted text, Gazette publication and commencement. Treat the FAQ as an intended change until those steps are verified.
- “An advance ruling applies to every CRO.” Use rulings to understand factual questions, then perform an independent analysis of your contracts, samples and sites.
- “A generic invoice description is enough.” Use service-specific statements of work and keep records showing who performed what, where and for which recipient.
When specialist advice is warranted
This is an informational framework, not a transaction-specific opinion. Obtain advice from a GST professional experienced in pharma R&D or CRO operations when a project combines sample-based testing, multiple affiliates, investigator payments, subcontracting or a proposed-law transition. The adviser should review the full contract chain and operational evidence, not just the customer’s country or the invoice currency.
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