Import of Service

[Kaustubh Karandikar]

Parent / Sister Concern of XYZ is giving a Bank Guarantee of the foreign bank to the foreign customer on behalf of XYZ. This bank guarantee is towards any damage / defects to the product exported by XYZ. The foreign bank is charging certain charges on monthly basis against this bank guarantee to the Parent / Sister Concern of XYZ. The Parent / Sister Concern is paying the same to the foreign bank and recovering from XYZ on monthly basis. Is XYZ required to pay GST on it as import of service?

[Shilpi Jain]

It would be an import of service by the parent/sister concern of XYZ. ITC can be availed of this and charged back to XYZ who can then claim refund

[Rajagopalan Ranganathan]

Sir,

A foreign bank providing service from outside India cannot be 'banking company' according to Section 45 A of Reserve Bank of India Act, 1934. hence general provision of place of supply of service will apply, that is, location of recipient of service will be place of supply. Therefore XYZ receives the service through parent/ sister concern of XYZ XYZ is liable to pay gst under RCM and XYZ can take ITC of the same.

AI Summary

XYZ Liable for GST on Bank Guarantee Charges from Foreign Bank Under RCM, Eligible for ITC Claim A discussion on a forum addressed whether XYZ is required to pay GST on charges incurred by its parent/sister concern for a bank guarantee provided by a foreign bank. The parent/sister concern pays the foreign bank and recovers the charges from XYZ. One response indicated it is an import of service, allowing XYZ to claim Input Tax Credit (ITC) and potentially a refund. Another response clarified that since the service is provided from outside India, XYZ is liable to pay GST under the Reverse Charge Mechanism (RCM) and can claim ITC.