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Step-up on GST:

Blog Post created by www.withdia.com Your Intelligent Assistant on Jun 6, 2017

With GST set to be implemented, www.withdia.com brings to you collaborative wisdom on the GST law and potential impact areas for your business. In this blog, we look at a query on timing for payment of taxes in case of continuous supplies such as AMC services.

 

Query:

We provide AMC services to our clients who are located across India and in overseas locations. The period of our contracts ranges from 6 months to 3 years. The billing may be on a monthly or quarterly basis, and the payments are due within 30 days from the date of the bill. When does the liability to pay tax trigger under GST?

 

Response:

Services supplied or agreed to be supplied continuously and on recurrent basis, under a contract lasting for a period of more than 3 months will be regarded as a ‘continuous supply of services’ under GST.

 

In respect of such contracts, the ‘time of supply’ would be the earliest of the following events:

  1. Date of issue of invoice for the AMC services where the invoice is issued within the timelines specified in the contract (if the invoice is not issued as per the said timelines, consider the due date by which the service provider should have issued the invoice);
  2. Date of receipt of consideration for the AMC services.

Where the above are not available or are not ascertainable, time of supply would be the date on which the recipient shows receipt of such services in his books of account.

 

Accordingly, GST on such AMC services would become payable for the month in which the invoice is issued by the company (monthly or quarterly, as the case may be) – since the other events are taking place after the issuance of invoice, in the instant case.

 

With specific reference to overseas customers, it would qualify as ‘exports’ and therefore, be zero-rated, subject to the fulfilment of following conditions:

  1.  Supplier of services is located in India;
    • Fulfilled in the instant case;
  2. Recipient of services is located outside India;
    • Fulfilled in the instant case;
  3. Place of supply of such services is outside India;
    • Fulfilled since the place of supply of AMC services would be the location of the recipient; however, if there are any goods which are required to be made available by the customer for the purposes of AMC, the place of actual performance of services by the company would be the place of supply of services;
  4. The consideration is received in convertible foreign exchange;
    • Assumed fulfilled in the instant case.

 

Accordingly, in the instant case, subject to the fulfilment of condition (3) supra, the supply of AMC services would qualify as ‘exports’ and would be zero-rated – viz. no GST would be payable on such transactions.

 

 

Legislative reference: Section 13 of the CGST Act, 2017; Section 16 read with Section 2(6) of the IGST Act

Authors: Meghana Belawadi and NR Badrinath

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