Goods Transport services in relation to export of goods to Nepal & Bhutan Impact of Recent Amendments – Goods and Services Tax – GST – By: – Rakesh Garg – Dated:- 6-2-2019 – A. LEGISLATIVE BACKGROUND 1. Meaning of Export of Service – Sec 2(6) of the IGST Act Export of services means the supply of any service when,- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India [Words in italic inserted vide IGST Amendment Act, 2018 w.e.f. 01.02.2019]; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8. 2. Meaning of Recipient of Service – Sec 2(93) of the CGST Act Recipient of supply of goods or services or bo
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han a registered person, shall be the location at which such goods are handed over for their transportation. Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods. [Proviso inserted vide IGST Amendment Act, 2018, w.e.f. 01.02.2019] 4. Place of supply in relation to GTA service where location of supplier or location of recipient is outside India – Sec 13(9) of the IGST Act The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. 5. Exemption vide Notification No. 9/2017- IGST (Rate), dated 28.06.2017 Entry No. 10D – Supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees . Inserted vide Notification No. 42/2017- IGST (Rate), dated 27.10.2017; and Omitted vide Notification No. 02/2019- IGST (Rate), dated 04.02.2019 6. Explanation (a) to Rule 43(2) of the GST Rules For the
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ocation of Recipient – M/s B, Nepal Place of Supply – Sec 13(9) – Nepal; Mode of remittance – Indian Rupees The transaction shall not be treated as export since consideration is received in Indian Rupees. Therefore, Exemption Entry no. 10D of Notification No. 9/2017- IGST (Rate) effective from 27 Oct. 2017 gave the relief, which exempted such transactions. Further, an explanation was also added in Rule 43(2), whereby these services were excluded from exempted services; hence, there was no requirement to reverse input tax credit. After Amendment in Feb. 2019: Location of Supplier – XYZ, India; Location of Recipient – M/s B, Nepal Place of Supply – Sec 13(9) – Nepal; Mode of remittance – Indian Rupees (Permitted by RBI) Now, the definition of export of service also includes those cases where consideration is received in Indian Rupee. After, the amendment, it will be considered as export of service; and hence, zero rated. Further, explanation (a) in Rule 43(2) has also been omitted. Since
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b. 2019: Location of Supplier – XYZ, India; Location of Recipient – M/s A, India Place of Supply – Sec 12(8) – Nepal; Mode of remittance – Indian Rupees (Permitted by RBI) Now, the definition of export of service also includes those cases where consideration is received in Indian Rupee. Even after the amendment, the transaction will not be considered as export of service since location of recipient is in India, even though place of supply is Nepal. Entry 10D of Notification No. 9/2017- IGST (Rate) has also been omitted w.e.f. 04.02.2019; otherwise, the transaction would have been exempt since place of supply is at Nepal. Hence, the transaction would be taxable. Net Impact: Earlier transaction was treated as taxable supply; and after the amendment, the situation remains unchanged: Remains taxable. If that is so, the need to insert proviso in section 12(8) of the IGST Act, stipulating the place of supply, in case of services of transportation of goods to a place outside India, at the des
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