Reverse Charge Mechanism (RCM) for foreign testing services where goods are procured and used abroad.

[saravjit singh]

The foreign supplier provides testing services to an Indian recipient, where:

1. Goods are procured and used abroad by the supplier.

2. Testing is done as per the recipient's specifications.

3. The testing report is sent to the Indian recipient.

4. Payment is made by the Indian recipient.

Whether the recipient would be liable to pay GST under RCM, considering the place of supply is in India (recipient's location).

[Sadanand Bulbule]

Refer Section 2[11]] read with Section 13[2] of the IGST Act to decide the place of supply of service.

In your case, goods are located outside India. Testing services are performed outside india. You have not brought the goods into India or made availabale to the servive provider in India. Hence, in my opinion, it does not qualify as " import of service". Therefore RCM is not applicable.

Refer CBIC Circular No. 232/26-27/2024.

[Shilpi Jain]

There could be a liability since the goods are not provided by the recipient of the service whereby s. 13(3) of IGST may not apply. 

Get your contract reviewed to analyse further and advice appropriately

AI Summary

Reverse Charge Liability may arise for foreign testing services if place of supply is the recipient in India. An Indian recipient engages a foreign supplier to test goods located and used abroad; the supplier performs testing outside India and sends the report to the Indian recipient. The issue is whether this constitutes an import of service attracting the Reverse Charge Mechanism. One view finds no import of service where goods and testing are outside India and nothing was brought into or made available in India; an alternative view warns RCM may still arise depending on whether the recipient supplied the goods and advises a contract review.