Related Party Transactions

[Kaustubh Karandikar]

XYZ (India) is having a group company PQR in (Abu Dhabi). XYZ is providing design services to PQR, which it bills on an hourly basis. XYZ requires a software for design which will be supplied as a licence by an ABC(India) to be used by the employees of XYZ. The cost of the software will be borne by PQR but invoice of ABC will say “Bill to” PQR and “Ship to” XYZ. The software licence fee will be paid monthly/quarterly basis over 1 year by PQR. 1) Does XYZ had any GST liability in this transaction since XYZ and PQR are related? 2) Can XYZ claim ITC of the invoice issued by ABC?

AI Summary

GST Implications for XYZ: No RCM on Software from ABC; ITC Not Claimable on PQR-Billed Invoice. XYZ (India) provides design services to its group company PQR in Abu Dhabi and requires software licensed by ABC (India) for this purpose. The software cost is borne by PQR, with invoices stating 'Bill to' PQR and 'Ship to' XYZ. The query addresses whether XYZ has any GST liability due to the related party nature and if XYZ can claim Input Tax Credit (ITC) on the invoice from ABC. The response clarifies that if the hourly rate is independent of software usage, no separate Reverse Charge Mechanism (RCM) applies, and XYZ cannot claim ITC on the invoice billed to PQR.