The treatment of services supplied by Indian manufacturers to overseas customers has been under discussion in the context of GST export rules. A Business Standard report published on 5 October described a proposal to address a place-of-supply issue involving contract manufacturing performed for overseas companies when the finished goods remain in India. The proposal was discussed ahead of the GST Council meeting scheduled for 7 October.

This issue could matter to Indian rubber manufacturers that undertake job work, customized compounding, moulding, component development or contract manufacturing for foreign customers. In such arrangements, a foreign buyer may commission an Indian company to manufacture a product or component, while the finished goods are supplied to another party or remain within India. The GST treatment can depend on the precise contractual structure and the applicable place-of-supply provisions.

Export treatment can be important because qualifying exports of goods or services are generally subject to a different GST framework from domestic taxable supplies. Classification affects invoicing, tax payment, input tax credit and refund eligibility. However, an overseas customer and payment in foreign currency do not, by themselves, guarantee that a transaction qualifies as an export of services.