RCM Provision in case supplier is located in non taxable territory

[KSA Associates]

As per notification no.10/2017 of IGST (rate),

Sr. no 1 states that in case of supplier is located in non taxable territory and recipient is located in taxable territory, than the provision of RCM will be applicable. The Sr.no 1 stays silent on whether this provision is applicable only in case place of supply is in India or place of supply is outside India.

In case of Savio jewellery it has been taken stand that in case place of supply is outside India then also provisions of RCM will be applicable.

Dear expert, kindly evaluate whether in case of place of supply is outside India whether the provisions of RCM under Sr no 1 will be applicable or not?

AI Summary

Reverse charge mechanism: place of supply outside India generally excludes RCM applicability, but judicial variance creates litigation risk.
RCM under the entry for supplies by persons in non taxable territories to recipients in taxable territory conflicts with the statutory import of services test, which requires supplier outside India, recipient in India and place of supply in India; if place of supply is outside India the transaction is not an import and ordinarily should not attract RCM. Judicial decisions adopting a broader reading of the notification have created litigation risk. Taxpayers should align application with the charging provisions, preserve documentation, comply with invoice and payment voucher obligations for RCM, and consider advance rulings.