Is RCM applicable for import of services which have been 100% Exported

Hey Nitin! This is a common and interesting question around GST on import of services, especially digital goods.

Here’s how it works:

1. Is RCM (Reverse Charge Mechanism) applicable on import of services?

   • Yes, under GST law, import of services (whether tangible or intangible) is considered a supply under RCM, and IGST is applicable under Section 5(3) of IGST Act.

   • So when you import digital services (like digital codes from Japan/Korea), IGST is payable under RCM by you as the recipient.

2. What if you export these services later (100% export)?

   • Export of services is zero-rated under GST (0% IGST), so when you export, you can claim a refund of IGST paid on inputs and input services (including the IGST paid under RCM on imports).

   • The key point is: you must pay IGST under RCM on imported services at the time of import.

   • Since you export the services subsequently, you can claim input tax credit (ITC) of that IGST paid.

3. How to pay IGST under RCM and claim ITC?

   • You need to self-invoice or record the import of services in your books.

   • Pay IGST under RCM in your GSTR-3B (in the “reverse charge” liability column).

   • Claim the corresponding ITC of the IGST paid in the same return (subject to regular ITC rules).

   • Make sure the import is declared properly with the supplier details to maintain audit trail, even if there is no formal contract.

4. Paperless and contract-less nature?

   • GST does not require a physical contract or paper invoice for import of services; the payment and receipt of digital codes via PayPal qualify as import of services.

   • You must keep evidence of the transaction (payment receipts, digital codes received, email communication) to support your accounting and GST filings.

Summary: