Applicability of GST on Reverse Charge Mechanism for Import of Service
GST is Levy in accordance with the concept of supply.
According to section 7(1) (b) of CGST Act’ 2017 supply includes “import of services” for a consideration whether or not in the course or furtherance of business.
According to section 7 (4) of IGST Act’2017 if Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.
According to section 5 (3) of IGST Act’2017 The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both
Recommendation of Government on Section 5 (3) of IGST Act’ 2017 – Notification No 10/ 2017
|Sl.No||Category of Supply of Services||Supplier of service||Recipient of Service|
|1.||Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.||Any person located in a non-taxable territory||Any person located in the taxable territory other than non-taxable online recipient.|
Note: Non-taxable online recipient’ means Government, a local authority, a government authority, an individual or any person not registered under GST and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession.
So, according to above section and notification as person/ company would be treated as recipient of service and liable to pay tax on reverse charge basis as service provider are located in non-taxable territory.
Note: There is also provision in GST Act that if a person is liable to pay GST on reverse charge basis then he is liable to obtain compulsory registration under GST Act.