Repairs carried out outside India

[Kaustubh Karandikar]

XYZ(India) exported the goods to PQR(U.K.). On examining the goods on receipt, it was observed by PQR that it requires certain repairs which PQR did on his own and the repairing charges was recovered from XYZ. Will this transaction fall under Section 13(2) of IGST Act and therefore XYZ liable for reverse charge or it will fall under Section 13(3)(a) i.e. location where the services are actually performed and since it is performed outside India, XYZ not liable under RCM? In my view, it will fall under Section 13(3)(a) and therefore no RCM for XYZ. Views of the experts please.

[Shilpi Jain]

Instead can it not be treated as a deficiency in supply and treated as a Credit note required to be issued for the exports made?

[ArvindKumar P]

Since the repair is required to be done on the goods exported in their physical location, 13(3)(a) would be more appropriate. While the option of credit note may also be considered, it could result in correspending reduction of export benefits claimed.

[Ganeshan Kalyani]

In my view, RCM is not applicable.

[Shilpi Jain]

Yes, RCM will not be applicable, You may have to see if the exports are to be reduced or should be treated as expense.

AI Summary

Location of service performance: repairs done abroad fall outside reverse charge, with adjustment or credit note affecting export benefits.
Where repair of exported goods is physically performed outside India, the place-of-supply rule locating services at their place of performance applies, placing the repair outside the Indian reverse charge framework. Parties may alternatively treat the transaction as a credit-note adjustment to the export supply-potentially reducing export benefits-or classify the payment as an expense, each with distinct compliance consequences.