Reverse charge on import of service for export

[Ankur Mittal]

Hi,

We are an online advertising firm and advertise for foreign companies on foreign sites which are viewable only in there countries. We pay to these foreign sites where advertisement is done and receive payment from foreign companies whose advertisements we are doing. Are we liable to pay reverse charge for payment made for advertisements to these foreign countries.

[Rajagopalan Ranganathan]

Sir,

You have to pay service e tax by reverse charge on the amount received from owners of foreign sites whether it is in the nature of rent or licence fee.

[Ganeshan Kalyani]

There is no exemption given in the law stating that if you are exporting the service and the input for providing that service then the input service should be exempt.

The import of service is subject to GST. You are liable to pay IGST under reverse charge. The export of service is however exempt.

[Ganeshan Kalyani]

In my view, the tax paid under reverse charge can be claimed as refund assuming that you don't have any domestic supply of service.

AI Summary

Reverse charge on imported services: IGST applies to payments for foreign advertising services, with refund possibilities if no domestic supplies. Payments to foreign website owners for advertising services are taxable on the domestic recipient under reverse charge; under GST this attracts IGST on import of services. Export of the advertising service is treated as exempt but does not remove the reverse charge obligation on the imported input. Tax paid under reverse charge may be recoverable by refund or credit where there are no domestic taxable supplies.