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In our last article, we discussed about scope of supply under GST. The term “Supply” is the basis of taxation under GST, its definition is very wide and its scope is unlimited. We will try and bring separate articles while discussing different components of the term “Supply” under GST.

Actually in our daily life we come across many situations where knowingly or unknowingly avail some or the other services which as per GST law, are considered to be an import of services, for example when we pay for some online advertisement, buy some plugin or email package for our website or when pay for online trainings or webinars etc., we may be directly or indirectly involved in a supply in course of import of services. It is also irrelevant whether payment for such supply is mage in Indian current or foreign currency.

Also Special provisions have been made for payment of tax by a supplier of online information and database access or retrieval services (OIDAR services), where import of such services are liable to be taxed under forward charge mechanism. We will not discuss in detail these provisions here as they have already been discussed in our earlier article titled “Place of Supply under GST (Inter-state supplies Vs. Intra-state supplies)”. But it is clear that Import of service under GST is subject to both Reverse Charge & Forward charge Mechanism.

Taxability in case of import of services is somewhat different form normal services. In this article we are taking up the issue of Import of Services under the proposed GST regime. We will take up issues like what is Import of Service? whether import of service is taxable, if yes than who is liable to pay tax under Import of service? And on what value, tax will be imposed?

So, the first question that comes to our mind is what is Import of Services? Under the proposed GST regime, section 2(11) of IGST Act ‘2017 defines Import of service.

As per Section 2(11) of IGST Act ‘2017, ‘‘import of services” means the supply of any service, where:

(i) the Supplier of service is located outside India;

(ii) the Recipient of service is located in India; and

(iii) the Place of Supply of service is in India;

To determine whether a particular supply of service is to be considered as import of service or not, we must know the exact location of the recipient of services, location of the supplier of services and Place of Supply of such Services.

Now that we have understood the meaning of import of services, the next question that comes to our mind is that whether such import of service is taxable under GST or not? This is rather a ticklish question and answer to this question lies in Section 7 read with Schedule-I of CGST Act’2017.

As per section 7(1)(a) of CGST Act’ 2017

The expression “supply”

• includes Import of services

for a consideration

whether or not in the course or furtherance of business

As per clause 4 of SCHEDULE I of CGST Act’ 2017

• 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.

• even if made without consideration

• shall be treated as supply of service.

So, first of all it is clear that subject to some conditions supply includes import of supply. But two factors will decide whether such supply it is taxable under GST or not. First factor is the consideration of such supply and the second factor is whether such supply is made in the course or furtherance of business or not. We have tried to present these situations in a tabular format as below:

Import of Services under GSTIt is important to note that in case Import of services is made on or after the appointed day, such services shall be liable to tax under GST irrespective of the fact, that such transactions had been initiated before the appointed day. However , if the tax on such import of services had been paid in full under the existing law, than no tax shall be payable on such import under GST and if the tax on such import of services had been paid in part under the existing law, the balance amount of tax shall be payable on such import under GST.

Now that we know that which import of service is exempt and which is taxable, another question arises that in case import of service is taxable, who will be liable to pay the tax under GST?

Since import of service is treated as inter-state supply so provision of IGST Act’2017 shall apply and as per 5(4) of this act, IGST in respect of the supply of taxable services by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient 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 such supply.

So what will happen in case such services are received by un-registered person, will these services go un-taxed or there are provisions to tax such transactions? Though for these situations, some special provisions have been made for OIDAR services, it seems that other services imported by an un-registered person are not covered under GST.

It is pertinent to note that, persons who are required to pay tax under reverse charge are compulsorily required to obtain registration under GST, so even if some person is exclusively supplying tax-free supplies, but in case he is liable to deposit tax under reverse charge mechanism, then he will have to obtain registration.

In case of supply of OIDAR services, where such supply is

Made by any person located in a non-taxable territory and

Received by a non-taxable online recipient, directly from the supplier

the supplier of services located in a non-taxable territory shall be the person liable for paying IGST on such supply of services.

In case of supply of OIDAR services, where such supply is

Made by any person located in a non-taxable territory and

Received by a nontaxable online recipient, through an intermediary

Such intermediary located in the non-taxable territory, shall be deemed to be the recipient of such services and shall be deemed to be supplying such services to the non-taxable online recipient. So such intermediary shall be liable to pay tax for such services.

However in case intermediary satisfies the following conditions, he shall not be held liable for tax on such services and supplier will pay the taxes:

(a) the invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory;

(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its charge which is that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services;

(c) the intermediary involved in the supply does not authorise delivery; and

(d) the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.

Such supplier shall, for payment of IGST, take a single registration under the Simplified Registration Scheme to be notified by the Government. Alternatively, any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay IGST on behalf of the supplier. In case such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.

Now the last question which may arise in everybody’s mind is that, what will be the value of supply where the transaction is made without consideration? In such cases Value of Supply Rules will apply and for more details on this issue please refer our article “Value of taxable Supply under GST”

Thank you for reading article written by CA. Mithun Khatry

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This article includes general information about legal issues and developments in the proposed law of GST in India. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances.

We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this article to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.

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  1. vnbhoir31 says:

    Very nicely written Article.
    I have Query similar to Mr. Himanshu Bachhhan.

    This is related to Tour Operator in India. He is providing Services to Clients in India for Tour in Dubai.
    In this case Supplier of Service is Outside India, Place of Supply is outside India and Receipient of Service is in India.
    Whether GST applicable in this case…???


    Hi Mr Mithun,
    I have one question..i work in travel trade & we import services (tours/transfers) from Indonesia (As we are travel agent who sells tours & transfers to our customers in india).
    In our case below is the scenario

    (i) the Supplier of service is located outside India; (ii) the Recipient of service is located in India; and (iii) the Place of Supply of service is located outside India; –

    Pls advise , will the GST would be applicable to us & if yes then what percentage?

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May 2024