Quick Summary
Introduction The Central Board of Indirect Taxation and Customs (CBIC) has directed field authorities to adhere to its June 26 circular when evaluating issues concerning the related party import of services by local firms. This move is expected to provide significant relief to Infosys and other sof
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FAQ :
The circular clarifies how to assess Goods and Services Tax (GST) on services imported by local firms from their related foreign entities, particularly when no invoice has been issued.
If a linked domestic firm has not received an invoice for services rendered by a foreign affiliate, the cost of those services is considered zero, and consequently, no GST will be applied.
The circular is expected to provide significant relief to Infosys, which had received a substantial pre-show cause notice from the DGGI for alleged non-payment of Integrated GST on imported services.
The clarification is particularly relevant for companies in the information technology (IT) and IT-enabled services (ITeS) sectors, including software companies.
For services rendered outside India, the locally registered entity typically pays GST under the reverse charge mechanism by issuing a self-invoice and remitting the tax.
The directive aims to prevent interpretative disputes and reduce potential litigation by providing clear guidelines on GST for imported services between related parties.
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