Nasscom Seeks GST Clarity on Overseas Branch Services, R&D Work Ahead of Council Meet

New Delhi, Oct 7 (KNN) IT-ITES industry body Nasscom has urged the GST Council to resolve two outstanding issues concerning services exports—GST treatment of services supplied through overseas branches and R&D work undertaken in India on prototypes provided by foreign customers.

Nasscom Vice President and Head of Public Policy Ashish Aggarwal said Indian service exporters often serve overseas customers through branches abroad, and the structure of their overseas presence should not determine whether services supplied from India qualify as exports.

“Clarity on this would support competitiveness, release working capital and reduce the litigation the industry has faced over the years,” Aggarwal said, PTI reported.

The GST Council is scheduled to meet on October 8.

Clarity Sought On R&D Services

Nasscom highlighted that another issue arises when Indian teams undertake R&D, engineering or testing on prototypes or samples supplied by overseas customers in India.

Under the current framework, such services are generally treated as supplied in India, where the work is performed, and therefore denied export treatment.

“The customer receives and uses the result abroad, and the service should qualify as an export,” Aggarwal said.

He noted that India has significant potential in technology-enabled services, R&D and engineering, including work undertaken by global capability centres (GCCs) for their overseas organisations.

“As AI and other technologies widen the range of services delivered from India, clarity on this point now would help prevent future disputes,” Aggarwal added.

HO-BO Transactions Remain Litigation Area

Nasscom has also been seeking clarity on GST treatment of international head office-branch office (HO-BO) transactions, which it said remains a persistent area of litigation for Indian IT-ITES exporters.

According to the industry body, the existing framework creates a disparity between services delivered through overseas branches and those routed through subsidiaries, resulting in input tax credit reversals and additional compliance burdens.

Nasscom had submitted a detailed paper to the Finance Ministry in October 2025 outlining the challenges and possible solutions, followed by a fresh submission to GST authorities on October 5, 2026.

Aggarwal said Nasscom has worked with the government on GST treatment of services exports for several years. The Council's 2021 clarifications settled the export status of GCCs serving foreign group companies, while removal of the intermediary provision this year addressed a long-standing dispute for IT-BPM firms.

The industry body expects the two remaining issues to come up before the Council at its meeting this week.

(KNN Bureau)