Is GST Applicable to Imported Services?

As per the IGST law, import of services under GST applies when the trade occurs in inter-state. It also applies when the consumer receives the services from a person residing outside India. The Government of India (GoI) implemented Goods and Services Tax (GST) to overhaul the current service tax regime and bring in significant changes to the way of doing business and cost of doing business in India. Those importing services on a regular basis shall enhance the impact of GST on their business, as GST applies to imported services. In this article, let us look at calculating and payments on imported services.

GST is Applicable on Imported Services

Under GST, the supply of goods and services in the course of import into India is be deemed to be supplied in the course of inter-State trade or commerce, attracting the levy of IGST. Thus, all import of services into India will be treated as deemed inter-State supplies and would be subject to GST.

IGST for import of goods into India will be levied based on the Customs Act, 1962 and Customs Tariff Act, 1975. IGST on import of services would be levied under the IGST Act. Goods imported into India would arrive at a Customs Station for levy of Customs Duty and IGST and then released to the importer. On the other hand, importer of services should pay GST on reverse charge basis. Also, for import of online information and database access or retrieval services (OIDAR) by unregistered, non-taxable recipients in India, the supplier of service located outside India shall hold responsibility for payment of GST. Hence, many foreign companies doing business in India should opt for GST registration. Further, the GST Council also advises all the companies to appoint a person in India for payment of taxes.

Calculating GST Applicable to Imported Services

Though the IGST Act makes it clear that GST is applicable on imported services, calculating GST on imported services is slightly more complex. To find if an import of service would be liable for payment of GST, a few tests as under have to be applied.

Only import of services for consideration applies as supply as per the CGST Act, 2017. Therefore, the consideration should apply to the import of services to enforce GST levy on the particular supply. Thus, import and use of free services from Foreign Corporations like Whatsapp, Facebook and Instagram by all of us, without any consideration, are not liable for tax under GST.
However, if the import of service from a related person in the course or furtherance of business termed as supply, even made without any consideration. Thus, upon importing services or used imported services, even without any consideration, it shall reflect as supply and liable for payment of GST.

All imports of services made on or after the GST implementation day becomes liable for payment of IGST. It shall also apply to the import of services regardless of the agreement made. However, the GST Act states that GST stands at nil rate if the consumer paid the full amount of the tax for the import of services. If only part of the tax had been paid under the existing law, then the balance amount of tax would be payable under the IGST Act.

Paying GST on Imported Services

Importer of services will have to pay GST on reverse charge basis. Reverse charge means the liability to pay GST rests with the recipient of the supply of goods or services instead of the supplier of such goods or services. Hence, in case of import of service, the recipient of the service in India becomes liable for the payment of tax.

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Frequently Asked Questions

Common questions about GST on Imported Services in India: Understanding IGST Regulations.

Under GST, the import of services into India is considered a deemed inter-state supply, which attracts IGST (Integrated Goods and Services Tax). This ensures that imported services are subject to GST, just like domestic services, creating a level playing field and preventing tax evasion.

The recipient of the imported service in India is liable to pay GST on a reverse charge basis. This means the recipient, rather than the foreign supplier, is responsible for paying the applicable GST on the imported service.

Yes, all imported services for consideration are subject to GST under the IGST Act. However, free services imported from foreign entities without any consideration, like Facebook or WhatsApp, are not liable for GST.

Calculating GST on imported services can be complex. Factors like the consideration involved, whether the import is for business purposes, and whether any tax has already been paid under the previous regime need to be considered.

The place of supply for imported services is deemed to be in India, making it an inter-state supply subject to IGST. This ensures that imported services are taxed uniformly across the country, regardless of the recipient's location.

If the full tax amount has already been paid for the import of services under the previous tax regime, the GST on such services may be nil-rated. However, if only a portion of the tax was paid earlier, the balance amount would be payable under the IGST Act.

Foreign companies supplying online information and database access or retrieval services (OIDAR) to unregistered, non-taxable recipients in India are required to register for GST and pay the applicable taxes.

Yes, the GST Council advises foreign companies doing business in India to appoint a representative person in India for the purpose of GST payment and compliance.

No, GST is applicable only on imported services received on or after the GST implementation date, regardless of when the agreement for such services was made.

The reverse charge mechanism for imported services ensures that the tax liability falls on the recipient in India, making it easier for the government to monitor and collect taxes on such transactions.