The government updated GST rules to boost service exports, helping IT and engineering firms. Revenue Secretary Arvind Srivastava said, "Basically the approach has been something which is really an export in its character." These changes allow companies to get benefits even when using overseas branches or processing goods within India.
The measures seek to align GST rules more closely with the way Indian services are actually delivered in global markets, addressing some of the long-standing difficulties faced by IT and IT-enabled services, engineering and consulting firms, research organisations and other professional service exporters.
"Basically the approach has been something which is really an export in its character, economic or financial. Tax should recognise it," Revenue Secretary Arvind Srivastava said after the council meeting.
Under the changes, an Indian company serving a foreign customer through its own branch abroad will be eligible for export benefits. The existing condition that could prevent such transactions from qualifying as exports is being removed, provided the other export conditions are met. The move is expected to particularly help analytics firms, design studios, engineering consultancies and other businesses that maintain overseas offices to serve local clients.
This addresses a key issue flagged by the services industry ahead of the Council meeting, where companies had sought recognition of services supplied to overseas customers irrespective of whether they operated through an overseas branch.
The Council has also approved changes for services performed in India on goods belonging to foreign customers. Testing, repair, certification, research, processing and similar activities will qualify as exports even when the goods do not leave India.
"The GST law did not define it. It said a product has to go out to become an export. We are clarifying that," Srivastava said.
"This will provide a level playing field for India in contract manufacturing and processing, improving its competitiveness as a global service destination," Partner- Indirect Tax, Nangia Global Rahul Shekhar said.
The council has also clarified that goods supplied to overseas buyers but delivered to an Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) in India will qualify for zero-rated treatment, provided payment is received in permitted foreign exchange or Indian rupees. The move will give Indian manufacturers certainty over GST benefits when goods are warehoused or further processed in India before being exported.
The changes are significant for India's services exports, which touched $421.3 billion in 2025-26 and accounted for nearly half of the country's total exports.
The Council has also aligned the treatment of export payments with Reserve Bank of India (RBI) rules, so that there is a common standard for determining when export proceeds are received. This is aimed at eliminating situations where exporters comply with foreign exchange rules but face a separate test under GST.
Businesses with an inverted tax structure will now be able to claim refunds of accumulated input tax credit on input services, in addition to goods. The provision will apply to credit availed from November 1, 2026.
Tax paid on plant and machinery, which was earlier excluded from the refund mechanism for exporters and businesses with inverted rate structure, will also become eligible. The refund will be spread over five years, at one-sixtieth of the eligible credit each month, for credit availed from April 1, 2027.
The broader refund changes are significant for services exporters because their cost base includes a large component of services and equipment. Faster recovery of such taxes would reduce the amount of working capital locked up in the GST credit chain.