supply without consideration

[Madhavan iyengar]

A Company in india had exported services to its related party in US and it qualifies as export of services as it satisfies all condition under gst law for exports

The Indian company has made some TP ( transfer pricingadjustment ) ie increase of 10% in value for income tax purpose in relation to above as a result it has booked additional income There is no underlying supply nor receipt of consideration

Query: How to deal with this transaction under GST

[Rajagopalan Ranganathan]

Sir,

In my opinion, for whatever purpose the additional 10% amount is received by you it is in connection with export of service. Therefore it will be treated as realisation due export of service. therefore there will be no GST implication wi respect to this additional amount.

[Ganeshan Kalyani]

Sir. Take LUT.

[Madhavan iyengar]

Sir

My submissions are as under

There wont be any consideration received one of the conditions for treating it as export of services is money should be received in foreign currency since it is not received it cant be export of services

once it is not export of service issue of LUT will also be in question

First query is it a supply as it is only a unilateral act by the so called recipient due to income tax provisions he is accruing it as income if there is no consideration in the transaction can it be treated as a supply ( even if they are related parties as per schedule I any supply with out consideration will be treated as supply)

But that brings us back to basic definition of supply since there is no underlying activity associated just an act of booking income based on TP adjustment will it be treated as a supply

[Mahadev R]

There is no supply of any service. The adjustment is for supplies made earlier. I do not think that there is any GST impact.

[KASTURI SETHI]

I am also of the same view as expressed by Sh.Madhav R.

[SHARAD ANADA]

In my view it's not export of service as one of the condition is fulfilled in your case. Definition of export of service as per IGST Act sec 2(6) is reproduce here 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;

Condition v is not satisfied in you case

AI Summary

Supply without consideration: whether a transfer pricing adjustment that creates accrued income is a taxable supply under GST.
Whether a transfer pricing adjustment that creates accrued income without any fresh underlying supply or receipt in convertible foreign exchange constitutes a separate taxable supply or an export of services. The conflict centres on Schedule I treatment of supplies without consideration to related parties, the statutory export conditions requiring receipt in convertible foreign exchange and distinct establishment tests, and whether a retrospective TP adjustment is a standalone taxable event or an accounting allocation to an earlier supply.