GST UPDATE ON RCM LIABLITY ON SERVICES AVAILED OUTSIDE INDIA

GST UPDATE ON RCM LIABLITY ON SERVICES AVAILED OUTSIDE INDIA

This update is prepared to discuss about the doubtfulness arising in respect of payment of tax under RCM for expenses like commission paid to the commission agent situated abroad, travelling expenses incurred outside India etc. Though the services are provided to the assessee situated in India but all the expenses have been incurred outside India and payment has also been made therein. Before coming to any conclusion, we hereby discuss the relevant provisions in order to arrive at correct conclusion.
Section 2(11) of the IGST Act, 2017 defines import of service which reads as follows:-
‘‘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;

Furthermore, IGST is payable under reverse charge mechanism on services received from person located in non-taxable territory vide serial no. 1 of the Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017 which reads as follows:-

*Sl. No.*	*Category of supply of services*	*Supplier of service*	*Recipient of service*
1.	Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient	Any person located in non-taxable territory	Any person located in the taxable territory other than non-taxable online recipient.

Hence in the present case, the place of supply for the services availed by the commission agent is to be determined by provision contained in section 13(8) of the IGST Act, 2017 which reads as follows:-
The place of supply of the following services shall be the location of the supplier of services, namely:––

(a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) intermediary services;

(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.

Since the commission agent is covered by the term ‘intermediary services’ as given under section 2 (13) of the IGST Act, 2017, the place of supply in the present case is location of supplier being outside India. This means that the transaction is not covered under the definition of import of services as given above. However, inspite of the fact that the transaction is not covered under the definition of import of service, we shall discuss about the transaction falling under the ambit of section 7(5)(c) of the IGST Act which defines the meaning of ‘inter-state supply’ as follows:-

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

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

(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.

Moreover, the phrase ‘supply of goods or services or both in the taxable territory’ is to be determined according to the Place of Supply provisions contained in section 13 whereby section 13(8) would be applied and the services will have to be considered to be provided outside India (being location of service provider). Since the services are not provided in taxable territory, the situation is not covered by section 7(5)(c) and the transaction is not to be considered as Inter State Supply. Hence, no IGST is payable on the said transaction.
It is concluded that there is ambiguity as regards payment of IGST under reverse charge mechanism as discussed above. However, it is pertinent to mention that assessee can avail input tax credit of IGST paid by them under reverse charge mechanism. Hence, it is advisable to assessee to pay the IGST on the said services under reverse charge mechanism and avail the input tax credit of the same to avoid unnecessary dispute in future.

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GST UPDATE ON RCM LIABLITY ON SERVICES AVAILED OUTSIDE INDIA

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