Import and sale of software

[Kaustubh Karandikar]

XYZ(UK) is a parent company of PQR (India). XYZ has developed a software (Blue Box) which is cloud base software. XYZ will give this software to PQR without any charge. PQR will be selling this software in India to customers. PQR would also provide the hardware’s which will be procured from vendors within India and will be supplied to customers. Customer can subscribe the software and use it for pumps operations, maintenance, repairs. 1) Is PQR liable to pay GST on the software procured from XYZ on FOC basis since XYZ & PQR are related? 2) What is the rate of GST for this software?

AI Summary

Indian Subsidiary Must Pay GST on Free Software from UK Parent, Using Reverse Charge Mechanism XYZ, a UK-based company, provides its cloud-based software, Blue Box, to its Indian subsidiary, PQR, at no charge. PQR sells this software in India, along with hardware sourced locally. The query addresses whether PQR must pay Goods and Services Tax (GST) on the free-of-charge software from its parent company and the applicable GST rate. The responses confirm that PQR must pay GST under the reverse charge mechanism (RCM) since it is considered an import of services between related parties. The open market value must be determined for GST purposes, and if input tax credit (ITC) is available, the invoice value from XYZ can be used.