There is a party A in a foreign country that wants to market its products in India. We represent party A in India and help them in marketing and other support activities in India. We help them in getting orders from party B in India. Party A remits us commission in foreign currency, converted into rupees and given to us by our banks. Please clarify if we need to get registered under the goods and services tax (GST) and pay tax under the reverse charge mechanism (RCM) or any other head or not. If tax is payable, what will be the applicable rate under GST?
Given your facts, it would need to be determined whether services provided by you to A can qualify as export or not. For a transaction to qualify as export, certain conditions are required. One is that the place of supply (PoS) for such services should be located outside India. In this context, it would need to be determined whether you should qualify as an ‘intermediary’ or not and whether services rendered by you can be categorised as intermediary services for the purposes of GST
law. ‘Intermediary’ has been defined under GST
law to mean a person who facilitates supply of goods or services between two persons. The PoS in respect of ‘intermediary’ services has been defined to be the location of the supplier of goods/service.
If based on the facts and the nature of you arrangement with A, you qualify as an ‘intermediary’ for the purpose of GST law, you should be liable to deposit GST as your output liability and obtain the GST registration. If you do not qualify as an intermediary, services rendered by you may qualify as export, subject to fulfilment of prescribed conditions.
We are garment printers. We buy our printing ink, colour and chemicals from Kolkata. Garment manufacturers send the front and back parts of a garment to us for printing. We print that part and return it. We pay GST at 18 per cent on colour and chemicals and printing ink. We also pay GST on the rent of our place of printing. Earlier, value-added tax was charged to us at five per cent on 60 per cent of the printing charge. Now, what is the application of GST?
Services by way of printing of garments supplied by the principal manufacturer should qualify as ‘supply’ for the purpose of GST law. Accordingly, you should obtain registration under the law if you are having an aggregate turnover of more than Rs 20 lakh (on a pan-India basis) during a financial year. However, this limit is not applicable if you are engaged in interstate supply of services.
The GST rate prescribed for services by way of job work in relation to textile yarns (other than of man-made fibres) and textile fabrics is five per cent. If your services are not covered by such a category, the applicable GST rate should be 18 per cent. GST law doesn’t prescribe any abatements.
Based on these facts, you should be eligible to claim input tax credit for GST paid on colours, chemicals, printing ink and rent paid in respect of premises, used in providing taxable output supplies.
How can someone take ITC on bank charges? Banks don’t provide invoices. The charges are reflected only in the bank statement.
According to specific provisions under GST law, a statement issued by a bank can be treated as a tax invoice. Accordingly, you should be eligible to claim input tax credit, based on a statement issued by the bank, as long as it contains all the prescribed particulars, including your GST registration number.
The writer is tax partner, PwC India. Aditya Khanna, associate director, PwC, contributed to this column. The views expressed are experts’ own. Send your queries to email@example.com