Facts:-

♣ Name of Parent Company – A Ltd., Dubai, United Arab Emirates

♣ Name of their Indian Establishment – B Ltd.  at Thane

♣ Application initially Developed & Managed by – Parent Company

♣ Service Provider – C Pvt. Ltd.

♣ Nature of Service – Enhancement & or changes to the Application

♣ Way of providing ServiceThese enhancements & or changes will be done by C Pvt. Ltd. staff by going to the office of B Ltd. and then deploying these enhancement & or changes on the production environment by remotely accessing their computers. The Application is mainly used in Dubai.

♣ Parent Company asked to raised Bill in their name with billing address of Dubai

♣ Amount will be paid by Parent Company in convertible foreign exchange

Issue under consideration:-

What is the nature of transaction and liability under GST if any ?

Legal Provisions:-

Conditions to be fulfilled to qualify as Export of Services under GST

As per IGST Act Section 2(6) “Export of services” means the supply of any service when, –

(i) the supplier of service is located in India;( C Pvt. Ltd. )

(ii) the recipient of service is located outside India;(A Ltd., Dubai )

(iii) the place of supply of service is outside India;(Dubai – Location of Recipient)

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange;

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person

Zero Rated Supply [Sec.16(1) IGST Act]

“zero rated supply” means any of the following supplies of goods or services or both, namely:––

(a) Export of goods or services or both; or

(b) Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

OIDAR (Online Information and Database Access or Retrieval) Services

Both the following conditions must be satisfied to be an OIDAR service. If one is not satisfied, the service is not OIDAR.

i. Delivery is mediated through internet.

ii. The supply is essentially automated involving minimal human intervention and impossible without information technology.

Examples of OIDAR services:

  1. Advertising on internet
  2. Providing cloud services (Google Drive)
  3. Provision of e-books, movie, music, software and other intangibles via internet (Hotstar, Amazon Prime Video)
  4. Providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;
  5. Online gaming (Steam)

Applicability of GST for OIDAR Services

Location of Supplier of service Location of recipient of service Taxability Forward Charge/ Reverse Charge
India Outside India No

(Export of service)

NA

Place of supply for OIDAR

Receiver Place of supply
Any person Location of the recipient of services

Conclusions

On the basis of Facts and Legal provisions as mentioned above the following conclusions can be drawn:-

  • The service which C Pvt. Ltd is going to be provided will cover under OIDAR.
  • The C Pvt. Ltd. is fulfilling all the conditions to qualify the service as Export of Service
  • It will cover under Zero rated supply i.e. Supply without payment of IGST under a Bond or Letter of undertaking.

Disclosure – Views express above is personal and may differ person to person on the basis of knowledge and interpretation.

Author Bio

Qualification: Student - CA/CS/CMA
Company: CA Rajendra Y. Padhye
Location: Mumbai, Maharashtra, IN
Member Since: 02 Mar 2019 | Total Posts: 29
I am professionally engaged in Direct and Indirect Taxation, Audit and also an Author, Poet, Cartoonist, Caricaturist, you tuber. I authored a book named - Have a Wonderful Day. Available on amazon.in Link is https://www.amazon.in/dp/B088PC55TZ My you tube channel link is https://www.youtube.com/ch View Full Profile

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6 Comments

  1. Prakash Pimparkar says:

    Sirs
    I am providing Technical consulting to a company with office and located in UAE. Will receive payments in $ US The total job will be outside India Do I have need to pay GST in India ? Do I need to charge GST to the UAE company ?

  2. Vinay Kumar says:

    We have Pvt. Ltd. ( India based) has a contract with USA & UK based person for Garment related
    3rd Party Manufacture does manufacturing of goods for them and export directly through uk base supplier and UK Based supplied pay us for managing all supply in India and Pay us in foreign currency.
    Do we have to pay GST on the payment what we are getting payment from UK Supplier?

  3. Disha says:

    Hello,
    I am promoting the US-based company’s product in India on the internet. For this, I will be receiving payment in foreign currency. My question is should I raise a GST invoice and whether I should charge IGST or SGST.

  4. jayesh shah says:

    my partnership firm( India based) has a contract with UK based company for drug related research trial wherein the patients will be treated with the new drugs with all legal compliances.
    the trial results(Conducted in India) are to be submitted to UK based company based at UK.
    the UK based company is going to pay in foreign currency.
    Do i have to charge IGST while giving invoice for the services rendered?

    1. Rohan1983 says:

      Dear Mr. Jayesh Shah

      Section 13 of IGST Act 2017: Place of supply of services where location of supplier or location of recipient is outside India (CHAPTER V PLACE OF SUPPLY OF GOODS OR SERVICES OR BOTH)

      (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.

      The place of supply of the following services shall be the location where the services are actually performed, namely:—
      – services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

      Therefore as discussed above in your case –
      a) Place of Supply is in India as the trial results conducted in India and
      b) Location of Supplier is in India
      Therefore it will not be an export and if location of supplier i.e. your registered address state and place where the trial results carried on are in same state then CGST and SGST will be levied and if they are in different state ISGT will be levied.

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