Cross-border transactions are intricate and
complex in terms of indirect tax conse- quences in India. It is important to
under- stand and analyse the applicability of goods and services tax (GST) on
cross-border transactions. This is an analysis of the GST implications of some
pertinent situations and advance rulings.
Overseas
trade between local companies: Supply of goods from a place outside India to
another place outside India without them
entering
India is not taxable under the Goods
and Services Tax Act, 2017,
irrespective of the fact
that the supplier and/or the recipient
is located in India. Clause 7
of schedule-III of the act declares
that such merchanting trade transactions are not supply of
goods
or services.
However, this is not
applicable in the case of supply of services. Where services are
provided with a supply of goods
GST is levied on the supply of services
from a place outside India to another place outside India. Where
transport services, marketing services
or auxiliary business services are
provided with a supply of goods they
attract GST.
Services
by a provider abroad: Where
technical and advisory services are provided by a non-resident outside India to
someone located there, such services are generally subject to GST, and the
responsibility for payment will be on the recipient. It is an import of
services. However, this depends on the nature of the service being provided. If
a foreign company provides technical and
having permanent establishment in India and
providing technical services there is required to register and account for GST. High
sea sales: The GST council has clarified
that final buyers
are responsible for payment
of integrated goods and services tax (IGST) on filing import declarations for
customs clearance. Clause 8 was added
to schedule III of the GST act to provide that
high sea sales and supply from custom warehouses shall not amount to either
supply of goods or supply of services. Value
added is included in calculating GST and the buyer is responsible for
establishing a link between the first contracted price of the goods and the
last transaction.
Provision of
intermediary services: Place of
supply provisions are different for intermedi- ary services where the place
of supply is the location of the supplier. In an advance ruling sought by Toshniwal Brothers, agents
pro- vided intermediary services
including identi- fying prospective customers of products of their
foreign principal. In another
advance ruling sought by Sabre Travel Network India, the applicant was finding
subscribers for a foreign software company. Both applicants were
acting as intermediaries for foreign companies and such agents
or intermediaries have to
charge GST on commissions or fees charged
to foreign companies.
Ocean freight: Taxability
of ocean freight has been the matter of dispute in India for some time now. Importers are required
to
to double tax on the amount of ocean freight.
In an advance ruling sought by Bahl Paper
Mills, the government stated that if importers have already paid IGST on the
CIF value of goods imported, they are still required to pay IGST on ocean freight.
Demurrage fees on containers: Charges for cargo storage within port
premises, known as demurrage, are subject to GST.
Acquisitions by foreign
companies: The transfer of business assets such as real estate, debts
and fixed assets
is considered to be a supply
of goods and subject to GST. The
transfer of goodwill, that is a trademark
or brand name is considered as supply of services subject to GST but, transfer
of a business as a going concern
is considered
as neither a supply of goods or supply of
service and GST is not levied.
Disbursement
of net foreign loans: The
disbursement of a loan, and associated processing and advisory fees are
separate transactions even if it is the net amount that is disbursed by the
foreign company. Processing fees charged by foreign banks are the costs
incurred by the bank in pro- cessing the service request of the appli- cant and
this is an import of services. The applicant is required to pay GST. Advisory
services are dealt with similarly.
In all cases an advance ruling
should be sought to avoid any later legal action by the government.
advisory services in relation to immovable pay 5% of IGST on ocean freight services
property outside India, there will be no GST
implications for either party as the place
of supply is outside India. Intermediary
under reverse charge mechanism. The importer
also pays customs duty on the cost, insurance, and freight (CIF) value of
.
services are treated similarly. A non-resident the product being imported by. This leads
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