How does an Indian subsidiary receive payment from its foreign parent company?

Many Indian companies exist mainly to serve a foreign group company: a global capability centre doing engineering for a US parent, a back-office subsidiary handling accounts for a UK group, a design studio owned by a Dubai holding company, or a research unit billing a European parent. Their invoices go to a related company abroad, and that relationship changes three questions: does the GST export rule still apply, how should the money come in, and is the price acceptable for income tax.¹⁸

This guide answers each, using the law as it stands on 28 October 2026.¹³ It is general information; group structures vary, so confirm your own facts with a chartered accountant.

Is a service to a foreign parent company an export of services?

A service by an Indian subsidiary to its foreign parent is an export of services when all five conditions in section 2(6) of the Integrated Goods and Services Tax (IGST) Act are met.¹ The fifth condition, condition (v), requires that the supplier and recipient are not "merely establishments of a distinct person in accordance with Explanation 1 in section 8".¹

• Circular No. 161/17/2021-GST: dated 20 September 2021, it says a company incorporated in India and a company incorporated outside India are separate persons and separate legal entities, so a supply by an Indian subsidiary, sister concern or group concern to the foreign company's establishments abroad is not barred by condition (v).²
• Zero rating: an export is a zero-rated supply under section 16 of the IGST Act.⁴
• Other conditions: the place of supply must be outside India, and payment must be received in convertible foreign exchange, or in rupees where RBI permits.¹

See export of services under GST and FEMA.

Which group structures can export services to a foreign parent?

A company incorporated in India can export services to its foreign parent or group companies, while a supply between offices of the same legal person in two countries fails condition (v).²

For example, a back-office subsidiary handling accounts for a UK group sits in the first row, and a liaison office of the same group would sit in the last.²

How does an Indian subsidiary bill and get paid by its foreign parent?

An Indian subsidiary bills its foreign parent with its own invoice, and the parent pays into the Indian company's own account at an Authorised Dealer (AD) bank in the invoice currency.⁶ Before invoicing, check five things:

1. Entity type: the Indian entity is a company incorporated in India, not a branch or liaison office of the foreign company.²
2. Place of supply and payment: the place of supply is outside India under section 13 of the IGST Act, and payment will come in convertible foreign exchange.¹
3. LUT: a Letter of Undertaking (LUT) is in place if invoicing without IGST. See LUT filing.
4. Agreement: the inter-company agreement sets the price and payment term, with the payment term inside the nine-month realisation period.⁷
5. Transfer pricing: documentation supports the price.⁸

Under regulation 4 of the FEMA (Export and Import of Goods and Services) Regulations, 2026 (the 2026 Regulations), the AD bank credits export proceeds only after satisfying itself that the transaction is genuine.⁶ Purpose codes for inter-company services follow the nature of the service, as for any other client. Use the purpose code finder.

Which documents and deadlines apply to payments from a foreign parent?

The documents and deadlines that apply to payments from a foreign parent are the same as for any export: an Export Declaration Form (EDF), realisation within nine months, and bank approval for set-off or third-party receipts.⁶⁷

See EDF for service exporters, set-off of export receivables and third-party payments for exports.

What happens if a supply to a foreign parent does not meet the export rules?

If a supply to a foreign group company fails one of the five conditions in section 2(6), it is not an export of services and does not get zero-rated treatment under section 16.¹⁴

• Branch structures: an Indian branch or liaison office supplying its foreign head office fails condition (v).²
• Aged invoices: group companies sometimes let inter-company invoices age; the FEMA realisation deadline of nine months still applies.⁷
• Price challenges: an invoice can be a valid export under Circular No. 161/17/2021-GST and still need documentation showing the price is at arm's length.²⁸

The GST test and the income tax test are separate, so a pass on one does not settle the other.

Which law governs exports of services to a foreign parent company?

Section 2(6) of the IGST Act, read with CBIC Circular No. 161/17/2021-GST, governs the GST side, and section 161 of the Income-tax Act, 2025 governs the price.¹²⁸

What did the 57th GST Council meeting recommend on condition (v)?

The 57th GST Council meeting recommended omitting sub-clause (v) of clause (6) of section 2 of the IGST Act, which would remove the distinct-person condition for a supply of services to qualify as an export.³ The Council said this would facilitate refunds for Indian service providers supplying services to or through their foreign offices or branches.³

Note: A GST Council recommendation takes effect only when Parliament amends the IGST Act and the amendment is brought into force. As of 28 October 2026, condition (v) remains in section 2(6), and Circular No. 161/17/2021-GST still describes the position.¹²³

Does the intermediary rule still matter for group companies?

The intermediary rule matters less from 30 March 2026, because section 157 of the Finance Act, 2026 omitted section 13(8)(b) of the IGST Act from that date.⁵ Before that, Indian group companies providing sales support or marketing services for a foreign parent were often told the place of supply was in India. Supplies made before 30 March 2026 still follow the old rule.⁵ See intermediary services under GST.

How does transfer pricing apply to payments from a foreign parent?

Transfer pricing applies because a supply between an Indian company and its foreign parent is an international transaction between associated enterprises. Section 161(1) of the Income-tax Act, 2025 says income from an international transaction shall be determined having regard to the arm's length price.⁸ For the method, documentation and safe harbour questions, see transfer pricing for Indian subsidiaries.

What are the common mistakes when billing a foreign parent company?

The common mistakes are treating a branch like a subsidiary, treating the 57th GST Council recommendation as law, and letting inter-company invoices run past the realisation period.²³⁷

• Branch as subsidiary: a branch or liaison office cannot rely on Circular No. 161/17/2021-GST for export status.²
• Recommendation as law: if your structure is a branch, watch for the amendment that would follow the 57th GST Council recommendation, and do not treat it as law until it is notified.³
• Netting without approval: setting off amounts owed to the parent without the AD bank's approval under regulation 7.⁶
• Old intermediary advice: applying the omitted section 13(8)(b) to supplies from 30 March 2026.⁵

Group structures vary, so confirm your own facts with a chartered accountant before the first invoice goes out.