Reverse Charge Applicability on Import of Services

The service sector plays a significant part in the economy as it helps in the dispersion of technology to different industries. This blog would help people who have foreign clients or subsidiaries located outside India to know whether reverse charge mechanism (RCM) under GST will apply to the services rendered. 

Concept of Import of service under GST 

Under GST, import of service includes: 

1. When the service is supplied by a person located outside India. 
2. When a person who has rendered services is located in India. 
3. Where the place of supply of such service is in Indian Territory. 

Taxability of Import of Service 

As per the GST law, any services supplied in the course of import into India’s territory shall be considered as an inter-state supply.  

1. Import of service for consideration in the course or furtherance of business. 
2. Import of service for a consideration not in the course or furtherance of business. 
3. Import of service without any consideration from a related person or establishment (subsidiary) situated outside Indian territory in the course or furtherance of business. 

RCM Applicability on Import of Service 

As per Notification no.10/2017 Income Tax, GST is applicable under RCM on import of service if the service is supplied by a person located in non-taxable territory to any person who is located in the taxable territory. However, this does not include those online recipients who are non-taxable. 

So, as per the reverse charge mechanism (RCM), the recipient will be liable to pay IGST for the service rendered. Moreover, the recipient can also claim ITC to the extent of IGST paid by him/her.  

Place of Supply for Import of Service 

Generally, the place of supply for the import of services is the location of the recipient of such service. Hence, the recipient will be liable to discharge the liability and pay IGST.