GST on import of service

[Kaustubh Karandikar]

A foreigner from the parent company but working in India for XYZ (India) and is on the pay roll of XYZ. The family of the foreigner is staying abroad and his expenses abroad such as medical insurance, accommodation etc. are recovered by the parent company from XYZ. Is XYZ required to pay GST under reverse charge on the amount paid to the parent company in foreign currency?

[Amit Agrawal]

Entire contractual arrangement/s and factual understanding needs to be looked into, before arriving at any view.

One should also refer to Apex Court ruling in case of C.C.,C.E. & S.T. – BANGALORE (ADJUDICATION) ETC. VERSUS M/S NORTHERN OPERATING SYSTEMS PVT LTD. (2022 (5) TMI 967 - SUPREME COURT)

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Kaustubh Karandikar]

Thanks Amit ji for your valuable inputs on all my queries.

[Shilpi Jain]

Northern Operating System is creating havoc for the industry. This is going to create a sea of litigation. Though some assessees have started paying GST and taking ITC instead of disputing.

However, it would be a huge cost for the entities not entitled for the credit.

[Kaustubh Karandikar]

thanks shilpi ji for your advice on all my queries

AI Summary

Reverse charge on import of services may apply to employer reimbursements to foreign parent, depending on service characterisation.
Liability for reverse charge GST on foreign-currency payments to a foreign parent for an employee's family expenses depends on whether those payments constitute an import of services from the parent and on the precise contractual and factual allocation of payment and supply; recent case-law has increased litigation risk, leading some taxpayers to pay GST and claim input tax credit while others may bear unrecoverable costs.