Rent a cab in Foreign Country - RCM Implication, Goods and Services Tax - GST

[Indirect Tax]

Mr. A, director of ABC Ltd. paid for cab service in Foreign country while he was meeting the foreign clients. Prima Facie, it seems that place of supply will be India as per section 13(2) of IGST Act.

Kindly comment on Place of supply as well as RCM Applicability on said transaction.

Posts / Replies

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Yes, in the given case, the Place of Supply (POS) is determined as per Section 13(2) of the IGST Act, 2017, since cab services are not specifically covered under any other provision of Section 13. Accordingly, the POS would be the location of the recipient, which will be ABC Ltd (unless it's Mr. A, if bill is issued in his name). In both cases, the POS is India.

Further, this transaction qualifies as "Import of Service" under Section 2(11) of the IGST Act, 2017.

As per SI. No. 1 of Notification No. 10/2017 - Integrated Tax (Rate) dated 28-06-2017, GST under RCM is applicable, since:

• The service provider is located in a non-taxable territory (outside India).

• The service recipient is located in a taxable territory (India).

• The recipient is not a Non-Taxable Online Recipient (NTOR).

Additionally, there is no specific exemption available for this service.

Hence, ABC Ltd (if billed in its name) or Mr. A (if billed in his name for business purposes) would be liable to pay GST under RCM. The GST paid under RCM could be availed as credit in accordance with provisions.

Hope this clarifies the matter!

[YAGAY andSUN]

Analysis of Place of Supply and RCM Applicability on Cab Service Payment in a Foreign Country

The situation involves Mr. A, the director of ABC Ltd., who paid for cab services in a foreign country while meeting foreign clients. To determine the place of supply and the applicability of Reverse Charge Mechanism (RCM), we need to analyze the relevant provisions of the IGST Act, 2017, specifically under Section 13(2) (which deals with place of supply of services), and Section 5 (which outlines the conditions for RCM).

1. Place of Supply of Services:

According to Section 13(2) of the IGST Act, the place of supply for services is determined by the nature of the service provided. For transportation services (which cab services fall under), Section 13(2) specifies the general rule and exceptions.

Relevant Provisions:

• Section 13(2) of the IGST Act states:

  The place of supply of services shall be the location of the recipient of the service, unless the service is specifically covered under a different provision of the Act.

• Section 13(8) deals with specific services like transportation of passengers. According to Section 13(8), the place of supply of passenger transportation services is the place where the passenger embarks on the journey (in this case, the foreign country where Mr. A used the cab service).

Conclusion on Place of Supply:

Since the cab service was used outside India (in the foreign country), the place of supply for this transaction is not India but the foreign country where the service was provided. Thus, the place of supply is outside India.

2. Applicability of Reverse Charge Mechanism (RCM):

The Reverse Charge Mechanism (RCM) is applicable in certain situations where the recipient of the service is liable to pay the GST instead of the supplier. In this case, Mr. A (as a director of ABC Ltd.) is the recipient of the service.

Relevant Provisions:

• Section 5 of the IGST Act specifies that the Reverse Charge Mechanism (RCM) is applicable to certain services when the service is provided by a foreign service provider to an Indian company, and the service falls under the specific categories under Section 13 of the IGST Act.

• However, cab services provided in a foreign country for personal travel or business-related travel by a foreign supplier are generally not covered under the scope of RCM provisions in India because the place of supply is outside India. Since the place of supply is outside India, no GST will be applicable under the IGST Act in India.

Conclusion on RCM:

• RCM does not apply in this case, because:

  • The service (cab service) is provided outside India.

  • The place of supply is outside India, and hence, the transaction does not fall under the jurisdiction of Indian GST.

  • The service is not covered under the RCM provisions for services imported into India as the place of supply is not in India.

Key Points to Note:

• Place of supply for the cab service used by Mr. A in a foreign country is outside India.

• RCM does not apply in this case since the place of supply is outside India, and the service is not considered imported into India for GST purposes.

Final Conclusion:

The payment for the cab service in a foreign country by Mr. A does not attract GST in India, and the Reverse Charge Mechanism (RCM) does not apply to this transaction since the place of supply is outside India. Therefore, no GST liability arises in India for this transaction under the provisions of the IGST Act.