Applicability of GST on Reverse Charge Mechanism for Import of Service

GST is Levy in accordance with the concept of supply.

According to section 7(1) (b) of CGST Act’2017, supply includes “import of services” for a consideration whether or not within the course or furtherance of business.

According to section 7 (4) of IGST Act’2017, if Supply of services imported into India’s territory shall be treated as a supply of services in the course of inter-State trade or commerce.

According to section 5 (3) of IGST Act’2017, the govt may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he’s the person responsible for paying the tax in reference to the availability of such goods or services or both

Recommendation of government on Section 5 (3) of IGST Act’ 2017 – Notification No 10/ 2017

Note: Non-taxable online recipient’ means Government, a local authority, a government authority, an individual or any person not registered under GST and receiving online information and database access or retrieval services in reference to any purpose aside from commerce, industry, or the other business or profession.

A Deloitte Partner explains how GST impacted manufacturers, service providers differently

Conclusion:

So, according to the above section and notification, a person/ company would be treated as recipient of service and liable to pay tax on reverse charge basis as service providers are located in non-taxable territory.

Note: There is also a provision in GST Act that if a person is liable to pay GST on a reverse charge basis, he is liable to obtain compulsory registration under the GST Act.

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GST Registration (Proprietor)