Need Proper Clarification on GST Applicability

[MURAGAIAH MELANGI]

Dear All,

i have one query regarding GST, we have our corporate office at Spain, their subsidery Company registered at Hyderabad (Telangana), we have provided the services to Dr. Reddy Labs plant at Vizag (another State - AP) on the instructions of our Corporate office at Spain, my Spain will Invoice to DRL, Hyderabad office will Invoice to our Corporate office at Spain,

What are the Tax implications ?

Please give proper reply against this query.

Thanks & Regards

MURAGAIAH MELANGI

9000181579

[KASTURI SETHI]

Service has been consumed in India.It is inter-State supply. IGST is applicable.

[Alkesh Jani]

Sir,

In support of the views expressed by our expert Sh. Kasturiji sir, I wish to add that as the said services are supplied from Hydrabad to Vizag, it is definitely an “Inter-state” supplies and IGST is applicable.

In second scenario, although the services are supplied by the subsidiary company on instruction of corporate office in Spain, it will be treated as “inter-state” supply, as it does not satisfy the conditions of exports, which is as under

“(6) “export of services” means the supply of any service when,––

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

Explanation 1.––For the purposes of this Act, where a person has,––

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons”.

Further, In terms of Para 2 of Schedule-I which reads as under :-

“2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business”

In view of the above, Invoice raised by subsidiary company to Corporate office in Spain will be treated as supply even if made without consideration. However, In the instant case, Invoice is raised for the services performed in India, therefore, it can be termed as “made in the course or furtherance of business” hence, it shall be treated as “inter-state” supply and IGST is applicable.

Our experts may like to correct me if mistaken.

Thanks

[KASTURI SETHI]

I am thankful to Sh.Alkesh Jani, an expert for elaborating my reply with legal force.

[Ganeshan Kalyani]

I am also of the view that GST is applicable.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Alkesh Jani.

AI Summary

Inter-state supply: Services by an Indian subsidiary to another Indian location on foreign instruction attract IGST, not export. Services performed in India by an Indian subsidiary for consumption at another Indian location on instruction of a foreign corporate office are inter-state supplies attracting IGST; they do not qualify as exports because the supplier, place of supply and consumption are in India. Supplies between related or distinct persons made in the course of business are taxable even if invoiced to a foreign affiliate.