GST on import of service

[Kaustubh Karandikar]

XYZ(India) paying consideration to PQR, Germany (Parent company) for providing technical knowledge, designing of product and after sale service in relation to products manufactured by XYZ in India. The amount payable to PQR would depend on sales value of goods sold by XYZ. Is XYZ liable to pay GST on the amount paid to PQR?

[Ganeshan Kalyani]

This amounts to import of service which is taxable under reverse charge mechanism.

[Mahadev R]

This could be subject to RCM. However, principal supply to be identified in this case to decide on the category of service, HSN, rate and place of supply to finalise. Terms of the agreement to be read thoroughly for this.

AI Summary

Import of service: reverse charge may apply to payments for technical, design and after sale services to a foreign parent company. Payments by an Indian manufacturer to its foreign parent for technical knowledge, design and after sale services amount to an import of service potentially taxable under the reverse charge mechanism; the principal supply, HSN classification, applicable rate and place of supply must be determined from contractual terms to fix the recipient's GST obligations.