GST Council recommend Clarification on export admissibility when remittance is received in INR in Vostro account

The GST Council has approved a few measures to boost foreign trade, including allowing tax credits for service exporters receiving payments in rupees, which is critical for trade with countries like Iran and Russia that face global sanctions.

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To reduce reliance on the US dollar, the government has pushed for rupee-based trading arrangements with several countries, and banks from over 20 countries have opened special rupee (INR) Vostro accounts with Indian banks to remit payments for their imports from India. However, under the GST regime, many exporters of such services were denied input tax credits because the norms required foreign currency receipts to recognise the ‘export’ status.

“The Council has recommended that a circular be issued to clarify the admissibility of export remittances received in Special INR Vostro account, as permitted by the Reserve Bank of India, for the purpose of consideration of supply of services to qualify as export of services under the Integrated GST [IGST] Act, 2017,” the Finance Ministry said in a statement following the GST Council meeting on Saturday.

According to a company director, disputes over refund requests sometimes resulted in the GST officers trying to refuse the benefit on the grounds that the receipt of INR as payment did not satisfy the requirements for qualifying as “exports of services.”

“This clarification will provide relief to the exporters whose GST refunds were stuck for a long time due to disagreements regarding this specific aspect, and they were also facing GST demands,” said tax experts.

The proposed clarification will be especially helpful to businesses looking to receive export proceeds from Iran or Russia, countries where regular remittance routes are blocked by US sanctions.