GST paid under wrong head

[Kaustubh Karandikar]

XYZ paid GST wrongly under IGST instead of paying under CGST + SGST for the period July’17 to September’18. Can they adjust the same while paying current months liability by issuing credit notes or they need to again pay CGST + SGST and then claim refund of IGST wrongly paid?

[KASTURI SETHI]

Dear Querist, Are you sure about 'Place of supply' ? More details are required for correct reply.

[Kaustubh Karandikar]

XYZ (Punjab) receiving commission for abroad on which GST is paid. As per Section 13(8) of IGST Act the POS in case of intermediary services is the location of the supplier of services. Accordingly, the POS would be Punjab. Further the location of supplier is also Punjab and therefore as per Section 8(2) of IGST Act it is an intra-State supply and thus CGST + SGST will apply. Correct? If yes, XYZ paid GST wrongly under IGST instead of paying under CGST + SGST for the period July’17 to September’18. Can they adjust the same while paying current months liability by issuing credit notes or they need to again pay CGST + SGST and then claim refund of IGST wrongly paid?

[KASTURI SETHI]

You have received commission "from abroad and not "for abroad". Am I right ? If it is so, It is inter state service and IGST is applicable.

[Kaustubh Karandikar]

yes received from abroad. But will it not fall under Section 8(2) of IGST Act and if not under which sub-section of Section 7 will it fall?

[KASTURI SETHI]

Dear Sir,

Your client is supplying /providing services, namely, " intermediary services" abroad and getting commission from a foreign service receiver. Service has been consumed outside India. As per Section 13(8) (b) of IGST Act, 2017, place of supply is location of supplier i.e. within India . So it is inter-State supply. and not intra-State. These, being intermediary services, are NOT covered under Section 7 of IGST Act.

[Kaustubh Karandikar]

Sir, i appreciate your views. But Section 13 decides the applicability of GST based on 'Place of Supply' and once that is decided, Section 7 and 8 decides whether it is an inter-state or intra-state supply. Therefore, in my view, Section 8(2) will get atteacted unless it is getting hit by the words 'subject to Section 12'. Your views please.

[KASTURI SETHI]

Dear Sir,. Whenever we talk of service, first of all, the first of all question arises is that of determination of classification. Thereafter, the question of determination of place of supply arises. Now you cannot deny that your client has provided intermediary services. And you cannot deny that service has been consumed outside India. Now you cannot talk of Section 7 or 8 of IGST . It is inter -State supply and reap the benefits of Inter-State inherent in Section 13 instead of thinking about depositing against wrong type of tax.I wish other learned experts intervene to clear the air.

[Alkesh Jani]

Dear Sir,

In this regards, prima facie, I concur with the views of Sh. Kasturiji Sir, that as per the query, it can be treated as inter-state service.

However, few clarification in the matter is required such as

1. The services provided is with regards to any goods as given in Section 13(3)(a)?
2. Whether payment is received in foreign currency?
3. Have you raised any Invoice to Foreign Service recipient?

Further, Section 13 of IGST Act, clearly states that “Place of supply of service where location of supplier or location of recipient is outside India..” To arrive at any conclusion for any sub-clause above details are required. Moreover, Sh. Kasturiji Sir, has rightly said that once Section 13 is applicable it is not wise to make other Section to come into play. One should decide that the transaction fits to the specific Section, if Yes, than full stop, if not the nearest Section which is applicable. Hope this may help the querist.

Thanks,

With regards,

[Kishan Barai]

I endorse the questions asked by Alkesh Jani Sir.

[KASTURI SETHI]

Sh.Kishan Barrai Ji,. Thanks to you as it is also endorsement of my views.

[KASTURI SETHI]

Sh.Alkesh Jani Ji, Beautifully elaborated/explained by you. The essence of your elaboration is "We are not to look back." as we are already going on right track.

[Kishan Barai]

Definitely KASTURI SETHI Sir, you are always best , no doubts on it.... 

[Alkesh Jani]

Dear All,

I thank all for everything and I take this Opportunity, to wish you and all your family members a happy Diwali

Thanks again,

With regards

AI Summary

Place of supply determines IGST applicability; intermediary services to foreign recipients treated as inter state so IGST applies.
For intermediary services where the supplier is in India and the service is consumed outside India, the place of supply rule designates the supplier's location, making the supply inter state and IGST applicable rather than CGST plus SGST; factual details such as relation to goods, currency of payment, and invoicing determine classification and the proper remedial procedure for any wrongly paid tax.