Import of Service

[Kaustubh Karandikar]

XYZ(India) is paying to Mr. PQR from USA in US$ towards marketing of the products of XYZ in USA. In the books of accounts of XYZ it is shown as salary but TDS under income tax is not deducted on it. Is XYZ required to pay GST under reverse charge?

[Amit Agrawal]

If Mr. PQR is an employee of XYZ(India) and doing the marketing in USA in course of his employment, then, no GST is payable under RCM by XYZ(India).

W.r.t. non-deduction of TDS, while I am not an expert in Income Tax Laws, I have seen multiple CA certificates which - in general terms - certifies that 'no tds is required on salary so paid when such income has accrued / outside India for the employee'.

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

[Amit Agrawal]

* ........ accrued / arised outside India ....

[Padmanathan KV]

The deduction/ non-deduction of TDS under Income Tax Act or even accounting in books of account cannot solely determine the taxability under GST.

The true nature of transaction has to be examined based on the contractual agreement between Mr.PQR and XYZ (India) i.e. whether it is "contract of service" or "contract for service".

If the relationship between Mr.PQR and XYZ (India) is that of master-servant ( ie. by applying test of control), then it is a "contract of service" or an employment contract and hence, covered under Sch III to the CGST Act. No GST.

If there contractual agreement is between a business and a self-employed individual (principal to principal basis) and no master-servant relation exists, then it is "contract for service" and becomes import of service liable to RCM.

[Shilpi Jain]

PQR is an intermediary in the US for the Indian company. PoS would be US and this transaction would not be liable to GST under RCM as the situs of service is outside India.

AI Summary

Import of service: reverse charge applies when a foreign individual supplies as independent contractor; employment is excluded.
GST liability for payments to a foreign individual for marketing hinges on the nature of the relationship and place of supply: an employment relationship (contract of service) is excluded from reverse charge, whereas an independent contractor relationship (contract for service) is import of service liable to reverse charge, subject to place of supply rules. Accounting treatment or non deduction of TDS does not determine GST liability; the contract terms and control tests govern characterisation.