Question17:  

XYZ(India) exporting goods outside India. Subsequently, if there are any repairs to be done on the goods during Warranty Period which is outside India, associate company of XYZ which is in Germany, is doing the same on behalf of XYZ and recovering the cost of the same from XYZ. Is XYZ liable to pay GST on it under reverse charge?

Answer:

To decide whether any transaction is covered first we have to see whether the same is supply of service or goods then the location of service provider and receiver. Then the place of supply then whether the tax is to be charged under forward or reverse charge method then tax rate etc In your case the process of repairing is service and location of supplier is out side India  please note import of service is covered under section 7 of CGST act not under section 9 so it should be considered as forward charge and not as reverse charge  It is a misunderstanding that the import of service is under reverse charge .It is like you pay IGST on import of goods but the same is covered under custom act so to cover service rules are framed in CGST act. The application of section 7 means it is under forward charge Now coming to next point the place of supply is outside India as per section 13(3) 3) The place of supply of the following services shall be the location where the services are actually performed, namely:' (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services: Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; As per above rule place of supply is outside India location of supplier is also outside India so no GST will apply. To make point more clear you can take reverse example if somebody imported goods in India and you provided repairing service on behalf of counterpart located outside India then you will charge GST If it is subjected to tax in other country then it will be double tax. (Reply dt. 11/12/2017)