Levy of IGST under RCM on Overseas Bank Charges arises for realisation of export proceeds

[Niketan Dhumal]

Query : Levy of IGST under RCM on Overseas Bank Charges arises for realisation of export proceeds.

As per the audit observation since the overseas bank has provided the service to us we are liable to RCM as a service received falls under Import of service category

We are engaged in supply of export of goods in International Market and accordingly goods are supplied based on relevant export documents to our export customer, as per payment terms our customers located outside India pay us consideration in foreign currency through overseas banks as per facilitation of by our customer and we are not having any contract with overseas banking company and it is exclusive arrangement of our customer. Overseas banks transfer the remittance to our Indian Bank after deducting nominal bank charges and balance amount is converted to INR and credited to our bank account in Bank in India.

Our Views on above issue:

Any fee or conversion charges which are levied for sending foreign current remittance from abroad are not liable to RCM under GST as a person sending the money and the Banking company conducting the remittance are located outside India and such services are deemed to be provided outside India territory and are not liable to GST under RCM.

Place of provision of service in case of Overseas Bank charges:

Accordingly to qualify the service as a Import of services as per section 2(11) of IGST Act it is required to fulfill 3 condition i.e.

The supplier of service is located outside India

The recipient of service is located in India and

The place of supply of service is in India

In case of overseas bank charges, place of supply of service is outside India, hence it does not comply the requirement of category of “Import of services’ to qualify the said services to pay the GST under reverse charges and hence RCM is not applicable in above transaction.

Further as per section13(8)(a) it has been categorically specified that, in case of services rendered by banking company or a financial institution or a non-banking financial company, to account holder the place of supply shall be the location of supplier.

Kindly provide the views from experts on above query as GST audits observe that RCM is applicable and accordingly started reovery of the same from Exporters.

AI Summary

Debate on IGST Reverse Charge Mechanism for Overseas Bank Charges in Export Proceeds: Sections 13(2) & 13(8) Interpretation A discussion on the applicability of Integrated Goods and Services Tax (IGST) under the Reverse Charge Mechanism (RCM) for overseas bank charges related to export proceeds. The original query argues that since the service is provided by a foreign bank, it does not qualify as an import of service under the IGST Act, as the place of supply is outside India. However, responses suggest that if the charges are deducted by the Indian bank or if the exporter is the recipient, it may be considered an import of service, making RCM applicable. The debate focuses on the interpretation of sections 13(2) and 13(8) of the IGST Act.