RCM on Import of Services under GST

Under the GST regime, the import of goods and services into the territory of India shall be treated as supply of goods or services in the course of inter-state trade according to IGST Act and hence, attracts IGST. In simple words, import of goods and services in India will be treated as inter-state supplies and liable for GST. In this article, we will discuss GST implications in relation to import of services into the territory of India.

Definition of Import of Services under GST

First of all, it is important to understand the meaning of “Import of Services”. As per Section 2(11) of the IGST Act, 2017:

“Import of Services” means the supply of any service, where,

(a) the supplier of service is located outside India,

(b) the recipient of service is located in India, and

(c) the place of supply of service is in India.

Scope of Supply for import of services

Section 7 of the CGST Act, 2017 defines the scope of “Supply”. According to the provisions of Section 7(1)(b) of the CGST Act, 2017, “Import of Services” for a consideration whether or not in the course of furtherance of business shall be considered as a supply. There is an exception to this provision which will discuss later.

The scope of “Supply” as above specifies the following three essential requirements for attracting taxability under GST:

• There should be an import of services
• There should be consideration for such services
• It is immaterial whether the service is imported for business purposes or personal use.

Is GST applicable on import of services for personal uses?

The definition of “Supply” specifies the words “whether or not in the course of furtherance of business”. Therefore, if any person imports a service into territory of India for a consideration for even his personal use, he shall be liable to pay GST thereon. However, if such service is imported free of cost, then, he shall not be liable for GST on the service so imported free of cost. It is immaterial whether the services are imported for business use or personal use.

Import of services without consideration

As already discussed above, if any services are imported for a consideration, it is liable for tax under GST law. It means that for bringing taxability under GST law, the consideration is a must. It is immaterial whether the transaction is for business purposes or personal use.

Now a question arises “Whether there is any case where services imported without consideration are taxable under GST?”.

The answer to this question is “Yes”. A plain reading of section 7(1)(b) of the CGST Act suggests that import of services without consideration will not be considered as supply whether or not in the course of furtherance of business. However, clause (c) of the section 7(1) read with Schedule I of the CGST Act specifies an exception.

Para 4 of Schedule I of CGST Act, 2017

Those activities which are specified in the Schedule-I of the CGST Act, 2017 shall be treated as supply even if there is no consideration. Para-4 of the Schedule-I specifies as below:

“Import of services by a person from a related person or from any of his other establishments outside India, in the course or furtherance of business.”

Hence, in case a person makes an import of services from a related person or any of his foreign establishments, import of services shall be taxable even if no consideration is involved subject to the condition that such services are imported in the course or furtherance of business.

Thus, we can summarize taxability of “Import of Services” as below:

Who will discharge GST liability in case of import of services?

Once, we have decided on the question “whether import of services is taxable or not?”, the next question before us is “Who will discharge tax liability in relation to import of services and the manner of discharge?”

The answer is: The importer of services shall be liable to discharge GST liability on import of such services.

Is Reverse Charge applicable on import of services?

Import of services are taxable in the hands of the importer (recipient) of services under Reverse Charge Mechanism. For this you may refer Sl. No. 1 of Notification no. 10/2017- integrated tax (rate) dated 28-06-2017 which states that:

In the case of any service supplied by any person who is located in a non-taxable territory to any person located in taxable territory (other than non-taxable online recipient), the recipient of such service (importer) shall be liable to pay GST under Reverse Charge Mechanism (RCM).

Hence, the importer of services shall be liable to discharge GST liability on the import of services under RCM.

Applicable tax on import of services

Section 7(4) of the IGST Act, 2017 states that 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. According to the GST laws, the taxpayers are liable to pay IGST in case there is a transaction in the nature of inter-state trade or commerce.

Hence, if you make an import of services, then you are liable to pay IGST at the rates specified under the GST laws. Such IGST is payable by the importer of services under reverse charge mechanism (RCM).

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