GST leviable on reimbursed amount, being advance payment by recipient towards cost incurred for provision of software services

Last updated: 18 May 2021

Save Share

Quick Summary

The Appellate Authority for Advance Ruling (AAAR) in Tamil Nadu has ruled that Goods and Services Tax (GST) is applicable on amounts reimbursed by a subsidiary company to its foreign holding company. This ruling clarifies that such reimbursements, which are advance payments towards software services, are considered part of the consideration and are taxable according to the time of supply provisions under the CGST Act. The applicable tax rate will be the same as that for the software services themselves.

Court :
AAAR, Tamil Nadu

Brief :
The AAAR, Tamil Nadu in the matter of M/S. ICU Medical India LLP [Order-in-Appeal No. AAAR/10/2021(AR), dated March 10, 2021] modified the ruling of AAR, Tamilnadu, to the extent that Goods and Services Tax ('GST') is leviable on the reimbursement by the subsidiary company to its ultimate holding company located outside India, being advance payment made by the holding company towards the cost incurred for the provision of software services supplied by the subsidiary company, as per the time of supply provided under Section 13 of the Central Goods and Services Tax Act, 2017 ('CGST Act') and applicable rate shall be same as applicable to the supply of software services made by them.

Citation :
Order-in-Appeal No. AAAR/10/2021(AR), dated March 10, 2021

Daily Limit Reached