CBIC issues Clarification on Export Remittances in Special INR Vostro Account for GST Compliance [Read Circular]

Based on the representations received, the Central Board of Indirect Taxes and Customs (CBIC), vide circular no. 202/14/2023-GST issued on 27th October 2023 has issued clarification on export remittances in Special INR Vostro Account,Reference is also invited to Para 2.52 (d) of chapter related to General Provisions Regarding Imports and Exports of the Foreign Trade Policy (FTP) 2023 as permitted by RBI, for the purpose of consideration of supply of services to qualify as export of services as per the provisions of clause (6) of section 2 of the Integrated Goods & Services Tax Act, 2017 (IGST Act).

According to the circular,  one of the conditions mentioned in sub-clause (iv) of Section 2(6) of the IGST Act that is “the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India”; the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India.

The board has also invited the reference to RBI’s A.P. (DIR Series) Circular No.10 dated 11th July, 2022 regarding International Trade Settlement in Indian Rupees (INR). In Para 3, it is stated that “In terms of Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016, AD banks in India have been permitted to open Rupee Vostro Accounts.”

Further in 3rd point of the Para 3, it was also stated that “Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.”

With reference to the legal provisions of ‘Export of services’ under IGST Act and Para 2.52 (d) of chapter related to General Provisions Regarding Imports and Exports of the Foreign Trade Policy (FTP) 2023, which has come into force from 01.04.2023, ‘it is clarified that when the Indian exporters, undertaking export of services, are paid the export proceeds in INR from the Special Rupee Vostro Accounts of correspondent bank(s) of the partner trading country, opened by AD banks, the same shall be considered to be fulfilling the conditions of sub-clause (iv) of clause (6) of section 2 of IGST Act, 2017, subject to the conditions/ restrictions mentioned in Foreign Trade Policy, 2023 & extant RBI Circulars and without prejudice to the permissions/ approvals, if any, required under any other law”.

To Read the full text of the Order CLICK HERE

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