QUESTION

Company A located in India, engaged a Service Provider in country B, to test a product supplied by Company A. The product had been purchased by company A from a manufcaturer located in country C. The product is and directly supplied to the service provider in country B from Country C.In my analysis Company A has to pay CGST and SGST and not IGST, on the amount paid to the service provider, as the place of supply in such circumstances shall be India and therefore it shall qualify to be Import of Service. Further supply of goods from a place in non taxable terrotary to another terrotary without such goods entering into India has been incuded in Scedule-III, i.e. it would neither be supply of goods nor service. In these circumstances, please advise how to account for these two transactions under the GST law. Regards, Khanduja

ANSWER

Facts of the case: Company A located in India, engaged a Service Provider in Country B, to test a product supplied by Company A. The product had been purchased by company A from a manufacturer located in country C. The product is directly supplied to the service provider in country B from Country C. In these circumstances, how to account for these two transactions under the GST law.

Law Applicable: SECTION 13 of IGST Act

(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:

SCHEDULE III OF CGST ACT

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

SECTION 2 of IGST Act

(11) ''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;

Interpretation: Supply of Goods by Company A located in India directly from Country C to Country B for testing:

In the given case Place of supply as per section 13(3)(a) is the location of Country B where the services are actually performed i.e. outside India and also location of supplier of service is Outside India, therefore this transaction is not Import of service and hence not taxable in GST.

Supply of Goods directly from Country C to Country B:
As per clause 7 of Schedule III of CGST Act Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India shall be treated as neither supply of goods nor supply of services.

Therefore supply of goods directly from Country C to Country B by Company A located in India is covered under above clause and hence is outside the ambit of GST.

Conclusion: Both the transactions are not taxable in GST. (Reply dt. 12/07/2021)