In this blog, we look at a query on taxability of import of services where the supplier has no establishment in India.
An STPI unit exports BPO /Software services with clients in Germany, Austria & Italy & receives in Euro (convertible forex). To facilitate after sales service, we have an entity in Germany that works on our instructions, whom we pay almost every month, in Euro. This Entity has NO ESTABLISHMENT in India. Is GST applicable? How much?
An import of service shall be liable to tax on reverse charge basis, payable by the recipient of the service being located in India.
For a service to qualify as an import of service, it must satisfy the following 3 conditions cumulatively:
(i ) the supplier of service is located outside India;
(ii) the recipient of service is located in India;
(iii) the place of supply of service is in India;
In the instant case, the place of supply would be the location of the recipient (i.e., location of the STPI unit in India), in terms of Section 13(2) of the IGST Act.
Therefore, regardless of the fact that the German entity (providing the facilitation services to the STPI unit in India) does not have an establishment in India, the supply, being an import of service, would attract IGST @ 18% under the code 9985 (support services).
Legislative reference: Sections 7 and 13 read with Section 2(11) of the IGST Act, 2017.
Authors: Meghana Belawadi and NR Badrinath
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