Import of Service

[Kaustubh Karandikar]

XYZ(India) is supplying machine to PQR(India). PQR is insisting to get the machine tested from ABC (Parent company of XYZ situated outside India). PQR is also insisting that ABC should give a Bank guarantee against this testing to PQR. ABC is recovering the charges paid towards bank guarantee given from XYZ. Is XYZ liable to pay GST on it under reverse charge?

[Ganeshan Kalyani]

It is Import of service. IGST is payable under reverse charge.

AI Summary

Import of service: IGST payable under reverse charge where foreign testing and guarantee charges are recovered by the supplier.
Testing performed abroad by a foreign parent for a domestic recipient and related bank guarantee charges recovered from the domestic supplier constitute an import of service; IGST is payable on that imported service under the reverse charge mechanism by the domestic recipient/supplier.