RCM on Import on Services

Save Share

This query is : Resolved

Quick Summary

This discussion clarifies the implications of the Reverse Charge Mechanism (RCM) on imported services, specifically e-journals. When a trader imports an e-journal service, they must pay IGST under RCM. If this service is then supplied to an educational institution that is exempt from GST, the trader faces a financial burden as the RCM cost isn't recoverable. While refunds for inverted duty structures exist, they may not apply if the output service is fully exempt. The advice suggests factoring the RCM GST cost into the selling price, effectively making the supply appear as Rs. 118 with Nil GST.

NRO0326255 Prabhat Ranjan

NRO0326255 Prabhat Ranjan (Querist)
Follow

14 February 2020 Dear Professions,

If any trader is importing e-journal service say Rs. 100 now he has to pay Rs. 18 as IGST on RCM (Total Purchase cost Rs. 118/-)
now, he supplied this service to the college which is exempt from this service. Now he supplied this Service for Rs. 100/-

Means sale of Rs. 100
purchase cost Rs. 118 (incl RCM)
as he has to RCM from his pocket? or there are any provisions on this service. and RCM is not allowable as a refund. Please clarify this situation.

CA Anita Bhadra

CA Anita Bhadra (Expert)
Follow

15 February 2020 A refund in case of an inverted duty structure can be claimed.
A registered person may claim a refund of unutilized ITC on account of Inverted Duty Structure where the credit has accumulated on account of the rate of tax on inputs being higher and output services are exempted and notified by the Government on the recommendations of the Council.
However, in your case, the fact need to be checked whether the supply of e-journal to college falls under exempted services by Govt notification.

CA Anita Bhadra

CA Anita Bhadra (Expert)
Follow

15 February 2020 Refer the link for more details on the taxability of e-journal to college

https://thetaxtalk.com/2019/12/10/levy-rate-of-gst-on-upply-of-online-educational-journals-and-periodicals-to-educational-institutions/

CA Anita Bhadra

CA Anita Bhadra (Expert)
Follow

15 February 2020 Small correction n my earlier response:- ITC on accumulated credit can not be claimed where the tax rate on output supply is NIL OR IT IS FULLY EXEMPTED except for supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.

The interpretation of the term 'Government notification' was incorrect.

NRO0326255 Prabhat Ranjan

NRO0326255 Prabhat Ranjan (Querist)
Follow

15 February 2020 Thanks for your Reply.
But In this case, the total purchase cost is Rs. 118
and Sales of Rs. 100
Means Rs. 18 is to pay from his pocket. it is a burden on the Trader or is there any other procedure?