GST on reverse charge basis

[Lalitha Krishnamurthy]

One of our clients, a recognized educational institution and not registered under GST Act, has invited some guest professors from abroad to deliver lectures. The return airfare of the foreign professors would be reimbursed by the client, in foreign currency, at actuals. Is there any liability to pay IGST on reverse charge basis on the reimbursed amount? Experts' opinion would be greatly appreciated.

[Shilpi Jain]

Is it possible to show that the entity has purchased the tickets for the prof? Is the ticket agency located abroad?

[Lalitha Krishnamurthy]

 The foreign national would purchase the ticket abroad directly and the client would reimburse the actual ticket cost to him.

[KASTURI SETHI]

Sh.Krishnamurthy Ji,

What is the constitutional status of the educational institution? Also mention its name.

[KASTURI SETHI]

(i) What is the status of payment of fee towards delivering the lecture by a foreign professor ?

(ii) No benefit of reimbursed amount 'at actuals' is admissible.

(iii) Whether reimbursement is made in Indian Currency or foreign currency; that is immaterial .

(iv) Under RCM GST registration is compulsory under Section 24 (iii) of CGST Act.

(v) Your client has received the service from a foreign country (non-taxable territory). It is a fact. Service Provider is located in non-taxable territory and service receiver is in taxable territory

(vi) Place of supply is in India.

[KALLESHAMURTHY MURTHY K.N.]

Madam,

As per Entry 30 of the Notification 11/2017 dated 28-06-2017, Educational Services is taxable @18%. However, certain services are exempted on the following

Services provided –

(a) by an educational institution to its students, faculty and  staff;

(b) to an educational institution, by way of, -

(i) transportation of students, faculty and staff;  

(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;

(iii) security or cleaning or housekeeping services performed in such educational institution

(iv) services relating to admission to, or conduct of examination by, such institution; up to higher secondary:

Under these circumstances, an Educational Institution above the category of higher Secondary is liable to tax on certain services supplied. In the above case, the foreign professionals were reimbursed for ticket charges. Apart from this, the remuneration paid to them is also taxable under RCM since such payments were collected amount from the students or trainees. The Institution is required to obtain Registration as per point No. (iv) of Serial No. (4) above.

This submission cannot be construed as legal advice.

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

Sir, I agree with your above reply in toto.

[Lalitha Krishnamurthy]

Thanks to all the experts for their views.

The proposed visit of professors from abroad does not involve any payment to them. They would be provided free boarding and lodging at the campus. Only their to and fro airfare expenses have to be borne by the Client, viz the educational institution which is a recognized university.

If, the return tickets are directly purchased by the university, would there be any import of services at all in the above arrangement which could involve payment of tax on reverse charge basis?

[KASTURI SETHI]

Sh.Krishnamurthy Ji,

Pl see the definition of 'consideration' under Section 2 (31) of CGST Act. Emphasis is laid on 'any payment made'. Also go through the definition of 'value of supply' under Section 15 (2) of CGST Act along with definition of 'import of service' under Section 2(11) of IGST Act, 2017. All should be read conjointly.

The educational institution has virtually borne the expenses. So it does not matter whether the payment made  is via reimbursement or direct.. The mode of payment does not change the scenario.

[Shilpi Jain]

In this case the moment the prof has purchased the tickets where is no service which the education institution is receiving from airlines from the purchase of tickets. 

What the educational institution is doing is only cost to the professional.

Do now the aspect to analyse is whether there is any consideration which is paid to the professor for his rendering of lecture.

Whether the reimbursement of ticket cost can be regarded as a consideration

[Shilpi Jain]

Even if regarded as a consideration since the professor is visiting India and providing his services can eat the regarded as a non resident taxable person whereby he would be required to discharge the tax by taking registration in India?

Would require further facts and analysis

AI Summary

Import of service: reimbursement of foreign professors' airfare can trigger reverse charge GST and registration obligations.
Reimbursement of foreign guest professors' airfare by an educational institution can constitute consideration and qualify as import of services with the place of supply in India, making GST liable under the reverse charge mechanism; the mode or currency of payment is immaterial, and registration may be compulsory where RCM applies, though exemptions for certain educational services do not automatically negate such liability and specific factual details determine the outcome.