Definition: Import of Services
Section 2(11) of IGST Act 2017 defines Import of Services as follows:
Import of services means the supply of any service where-
(i) The supplier of service is located outside
(ii) The recipient of service is located in India; and
(iii) The place of supply of service is in India;
To understand the various provisions of GST applicable on import of services let us take an example:-
John & Co an architecture consultancy firm of USA provided his services to Ram & Associates, a Chartered Accountants firm of India for designing it’s office at Mumbai and also to design the home of Mr Ram, the Managing Partner of Ram & Associates for a consideration of Rs 10,00,000 & Rs 2,00,000 respectively. Also Ram & Associates took the services of its’ associate firm Ram Capital in London which specializes in Capital Management to manage its surplus funds without any consideration.
Applicability of GST provisions in respect of import of services can be analyze with the help of above example :-
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Whether it is service or not?
As per Sec 2(102) of CGST Act , services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form currency or denomination to another form, currency or denomination for which a separate consideration is charged.
So, here designing consultancy by John & Co and capital management services by Ram Capital fall under the definition of services as these are activities other than goods, money and securities. Service can either be active i.e to do something or passive i.e not to do something.
Whether it is Supply or not?
As per Sec 7(1) (b) of CGST Act: Supply includes Import of Services for a consideration whether or not in the course or furtherance of business. Also as per point 4 of Schedule 1 of Sec 7 (1)(c) of CGST Act: Supply even if made without consideration includes Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.
The word ‘taxable’. has been omitted vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019. Thus, import by any person from a related person outside India shall be ‘import’, but it should be in the course or furtherance of business. (point 4 of Schedule 1 of Sec 7 (1)(c) of CGST Act).
In this case John& Co provides design consultancy to both Ram Associates and also to its Managing Partner Mr Ram. Service to Ram & Associates was for furtherance of business as the design was made for the office but service to Mr Ram for designing his home was not for the furtherance of business but rather individual personal use. But still both these conditions satisfy the conditions of Sec 7(1)(b) and hence are supply of service.
Ram Capital of London is an associate firm of Ram & Associates and thus is an establishment outside India. Ram & Associates is a taxable person importing capital management service without consideration. Hence it is a supply.
The Import of service from HO or branch outside India in the course or furtherance of business will be subject to GST even if no payment was made to HO or Branch outside India.
Whether it is Intra or Inter?
As per Sec 7(4) of CGST Act , Supply of services imported into the territory of India shall be treated to be supply of services in course of inter-state trade or commerce.
The services of John & Co and Ram Capital shall be treated as Inter and as a result IGST would be levied.
Place Of Supply
Sec 13 of IGST Act helps to determine the place of supply where the location of the supplier of service or the location of the recipient of service is outside India.
Here the service of John &Co for designing the office and home is a supply of service directly in relation to an immovable property. So according to Sec 13(4) of IGST Act, the place of supply will be the place where the immovable property is located or intended to be located. The place of supply in this case will be Mumbai i.e Maharashtra.
Branch office outside India providing service to Indian parent company is not import of service
An Indian parent company may have liaison office outside India. The Indian parent company will remit amount to liaison office outside India. In that case, that liaison office is ‘intermediary’.
As per section 2(11) of IGST Act, one of the conditions for treating a service as “import of service” is that place of supply of service should be in India. Since this condition is not satisfied, the service received by Indian parent company cannot be ‘import of service’. Consequently, Indian company will not be liable to pay service tax under reverse charge
Place of supply for intermediary services : In the case of supply of capital management service, Ram Capital is working as an agent or intermediary to manage the surplus funds of Ram & Co. So accordingly it falls under Sec 13(8) which deals with services of intermediary, the place of supply shall be the location of supplier I.e London.
Reverse Charges or Forward Charges
If the supplier of service is located in a non-taxable territory, the recipient of services located in the taxable territory is liable to pay GST under reverse charge. Notification Nos. 13/2017-CT (Rates) and 10/2017-IT (Rates) dated 28-6-2017
IGST is not payable on import of services under reverse charge if value of royalty and license fee was included in customs value of goods imported – (Notification No. 6/2018-IT (Rate) dated 25-1-2018 and FAQ issued by CBI&C on 15-12-2018. )
Time of Supply
Since supply covers under RCM ,the time of Supply shall be earlier of the followings :
a) Payment date or
b) Day after 60 days of issuance of invoice. i.e. 61st day.
Import of services by United Nations or a specified international organisation for official use of the United Nations or the specified international organisation is exempt from GST (Notification No. 9/2017-IT (Rate) dated 28-6-2017 – inserted w.e.f. 27-7-2018.)
Import of services by Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein is exempt from GST – (Notification No. 9/2017-IT (Rate) both dated 28-6-2017 – inserted w.e.f. 27-7-2018.)
(Republished with Amendments. Amendments been made by CA Anita Bhadra)
Author Bio
Hi, I am an Indian lawyer, and a unregistered GST user.
I have taken services of a European Lawyer for filing a Patent and Trademark application for an Indian Client.
Do i need to pay any GST under RCM for such services taken from European Lawyer? If yes, I would have to take a GST registration only for RCM as legal services are exempted under GST?
hello,
I have some people in USA who are individuals and they provide services to Indian company.
For that I’m paying their commission to USA through PayPal business account
So, do I need to deduct any service tax in that commission payment?
If yes then how much percentage tax will applicable???
Indian resident citizen moves to Canada after marriage on 15 Mar 2020. Until Mar 15 provided consulting and guest lectures from India. After 15 Mar he is providing same thru online services from Canada. Queries –
1. GST implication on transactions from Mar 15, 2020 (fy 2019-20)for supply of services from Canada
2. GST implication for fy 2020-21 for services provided from Canada where-
a. Receiver of supply is in India and
b. Receiver of supply is also outside India
Hi,please advise if GST will be applicable in case of cross country biz.
E.g customer in USA takes services from Company in India to ship their goods from China to USAnor other countries.Company in India in turn takes services from company in China,so Chinese company will Invoice to.company in India and in turn Indian company will Invoice to company in USA…Will GST be applicable under RCM criteria..Please advise if their is any ruling to this affect…Logically it should not apply as company in USA has nothing to do with India but just the comfort of working with the company..
Indian company employee in india availed training outside india is a import of service liable to IGST?
Applicability of GST on Sales Commission where
1)Supplier of Services is from non-taxable region
2) Sales is also to a buyer who is in non-taxable region
3) Services are for finding a buyer along with all the necessary coordination for the supply and payments
In such case, is IGST will be applicable?
Please advise
One more concern in case of import of services is:
Whether the value of supply under GST will include the tax deducted from the payment made to the supplier?
In case of foreign payments, since we already gross up the tax amount. What will be the value of supply in this considering tax deducted (equalisation levy) on payment made to non-resident supplier?
we have received service
manufacturing process improvement from US base consultant to tech employee
its comes under RCM -IGST we will pay IGST @18% against this service.
If in the above example, If Ram receive service of capital management from Ram Capital without consideration, then is this to be considered as supply under gst. If Yes, what will be the taxability?
Good..!!
Nicely presented the article..!!
Sincere pat to the author.!
in the case we import service relating net work hardware we have to pay gst
What if recepient of import service are Unregistered business
Then ,Who will pay Tax on Import of service for in course of busines ? ( supplier or recepient or No one)
What if recepient of import service are Unregistered
Then ,Who will pay Tax on Import of service for in course of busines ? ( supplier or recepient or No one)
Do I need to pay GST on foreign payment made towards graphic work? though foreign supplier dose not have any kind of setup in India
Is there any exemption available for IMPORT OF SERVICE for personal purpose
Like If Y received legal advisory from J&L Legal associates est. in USA , for divorce with his wife
as it is a personal purpose though it comes under sec 7(1)(b) ,Is there any exemption available IN EITHER CGST OR IGST act
I am availing services , provider is in USA and their server is also in USA. I am registered user in India under Reverse Charge Mech. and I am paying it. I exports my services 100% against LUT. How can I file refund since there is no such particular refund option on GST portal i may be paying 1.8 lkhs INR
GST treatment for imported services is through a concept of “reverse charge”. Reverse Charge Mechanism also known as Self Recipient Accounting (RSA).