GST on Import of Services in India – Taxability Analysis

By | May 4, 2017
(Last Updated On: May 9, 2017)

GST on Import of Services in India

Detailed analysis of GST on Import of Services in India with reference to IGST and CGST Act 2017 of India

Article 269A after Constitution 101st Amendment Bill 2016

Meaning of Import of Services in India

As per Article 269A after Constitution 101st Amendment Act 2016 

Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Explanation.—For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.

As per Section 2(11) of IGST Act 2017 :-

11) ‘‘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;

Import of Services in India is treated as Supply

As per Clause (b) and (c) of Section 7 of CGST Act 2017 , Scope of Supply shall include

b) import of services for a consideration whether or not in the course or furtherance of business;

(c) the activities specified in Schedule I, made or agreed to be made without a consideration;

As per Point No 4 of Schedule 1 of CGST 2017 following Activities to be treated as Supply even if made without Consideration

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.

Analysis of GST on Import of Services in India

GST will be payable i.e it will be treated as Supply even if made without Consideration  if following Conditions are satisfied  :-

  • 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.

Examples of GST on Import of Services in India

  1. Mr A is importing services from his brother in USA for designing of Mr A’s House in India and not paying any Consideration

No GST is payable by Mr A , as he is not importing services from his brother in USA in the course of or for furtherance of business. Mr A is importing services for his personal purpose.

2. Mr A is importing services from his brother in USA for designing of MR A’s Client House  in India and is not paying any Consideration

GST is payable by Mr A , as he is importing services from his brother in USA in the course of or for furtherance of his business. Mr A is importing services for his Client i.e Business purpose.

3. Mr A is importing services from his brother in USA for designing of MR A’s Client House  in India and is also paying Consideration to his brother in USA

GST is payable by Mr A , as he is importing services from his brother in USA in the course of or for furtherance of his business. Mr A is importing services for his Client i.e Business purpose.

4. Branch office of A ltd in India and A Ltd is importing services from Head Office in Japan

GST is payable by A Ltd under reverse charge because A Ltd is importing services in India  in the course of or for furtherance of his business from his other establishments outside India.

Import of Services in India is treated as Inter State Supply

As per Clause (4) and (5) of Section 7 of IGST Act 2017  :-

(4) 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.

(5) Supply of goods or services or both,––

(a) when the supplier is located in India and the place of supply is outside India;

(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or

(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

GST Payable on Import of Services in India on Reverse Charge basis

GST has to be paid by the person importing services in India in case the person from whom services are imported is not registered in India under GST  ( Refer sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act )

As per Section 2(98) of CGST Act 2017

(98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act ;

Time of Supply of Services in case of Import of Services in India

Since GST has to be paid under Reverse Charge basis on import of services in India , therefore time of Supply of services in case of import of services in India will be determined as per Section 13 (3) CGST Act 2017 which is reproduced as follow :-

……

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:—

(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

[ Note : As per Section 2(12) of CGST Act 2017 – “associated enterprises” shall have the same meaning as assigned to it in section 92A of the Income-tax Act, 1961 ( 43 of 1961); ]

Related Book on GST Act 2017 of India

GST on Import of Services in India

Leave a Reply

Your email address will not be published. Required fields are marked *