GST under RCM on services procured from foreign directors

[Dipika Shetye]

Having a glance at clarification issued by CBIC vide Circular No. 210/4/2024-GST dated 26th June 2024 , it may be construed that in cases where the Indian Company has not paid any consideration to foreign director for supply of services provided by them and, consequently, no self-invoice has been issued by the Indian company, the value may be deemed as nil, thereby not attracting GST liability.

Before this clarification was issued, many taxpayers were considering transaction between foreign director and Indian company as a supply even in the absence of consideration, and accordingly they were issuing self-invoice for compliance with GST law.

Please share your inputs on the above whether the taxpayers shall still proceed with discharging liability on the said transaction where there is no consideration.

[Shilpi Jain]

In case of transaction with related parties which fall under 2nd proviso to rule 28 where full credit is available to the recipient, there is no requirement to pay GST under RCM.

Circulars are binding on the department.

So if you are apprehensive that tomorrow dept may dispute non-payment, pls take support of this circular.

[Ganeshan Kalyani]

Where the recipient is eligible to claim full ITC then no need to pay RCM. In case the recipient is not eligible to claim ITC due to Sec 17(2) then RCM is applicable.

AI Summary

Reverse charge mechanism: GST may not apply to foreign director services where value is nil and recipient can claim full input tax credit. CBIC guidance treats services from foreign directors as having nil taxable value where no consideration is paid and no self invoice issued, so GST need not be paid under the reverse charge mechanism; however, where the recipient cannot claim full input tax credit because of blocked credit rules, reverse charge remains applicable, whereas recipients eligible for full credit and transactions within the related party proviso need not discharge GST under reverse charge.