Understand GST rules for imports and exports in India, including IGST application, input tax credits, and place of supply.
This article expands on previous discussions regarding the place of supply for goods, general services, and specific services by focusing on its application to imports and exports. We will explore various scenarios and provide illustrative examples.
Fundamental Principles of GST on Imports
Under GST regulations, any supply of goods or services brought into India is classified as an inter-state supply. Consequently, all such imports are subject to Integrated Goods and Services Tax (IGST). In addition to IGST, standard basic customs duty and other relevant customs charges will continue to apply.
- IGST on imported goods is levied and collected under the provisions of the Customs Act, 1962.
- IGST on imported services falls under the purview of the IGST Act.
Typically, the importer is responsible for depositing IGST through the reverse charge mechanism. However, for Online Information Database Access and Retrieval (OIDAR) services, the non-resident supplier must register and remit taxes. The IGST paid on imports can be claimed as input tax credit by the importer, which can then be offset against their GST liabilities on subsequent supplies.
Determining the Place of Supply for Imports
For goods imported into India, the place of supply is designated as the importer’s location. This means that if an importer resides in Karnataka, the state’s portion of the IGST will be allocated to Karnataka.
| Supply Type | Place of Supply | Applicable GST |
|---|---|---|
| Goods imported into India | Importer’s location | IGST |
| Services imported into India | Recipient’s location (or supplier’s location if recipient’s is unknown) | IGST |
Place of Supply for Goods: Imports and Exports
General Rules for Goods
| Supply Type | Place of Supply | Applicable GST |
|---|---|---|
| Goods imported into India | Importer’s location | Always IGST |
| Goods exported from India | Location outside India | Exempted from GST |
Example Scenarios for Goods
Example 1: Importing GoodsIf Ms. Malini, who operates a registered shop in Mumbai, imports school bags from China, the place of supply is Mumbai. Consequently, IGST will be applicable.
Example 2: Exporting GoodsWhen Ms. Anita from Kolkata exports Indian perfumes to the UK, the place of supply is considered to be the UK. In this situation, the export is exempt from GST.
Place of Supply for Services: Imports and Exports
General Rule for Services
| Supply Type | Recipient | Place of Supply |
|---|---|---|
| Import/Export of services | Any person | Recipient’s location*** |
If the recipient’s location is unavailable, the place of supply will be the service provider’s location.
It is important to remember that the reverse charge mechanism applies to imported services, meaning the service recipient is responsible for paying GST. For further details, refer to our article on GST’s impact on imports.
Specific Service Types
For these particular services, if the supply occurs in multiple locations, and even one of these locations is a taxable territory, then the place of supply is considered to be within that taxable territory. For instance, if a service is rendered in both Singapore and India, India would be the place of supply, and GST would be applicable. If these services are supplied across more than one state within India, all involved states are considered places of supply, and GST will be shared among them based on the service value.
Other Service Examples
Example 1: Banking ServicesIf Mr. Tom from London visits the HSBC Mumbai branch, the place of supply is Mumbai, and IGST is applied.
Example 2: Air Travel ServicesWhen British Airways transports Mr. Ajay from Mumbai to New York via London, the place of supply is Mumbai, as it is where the passenger begins the continuous journey. IGST will be applicable.
Online Information and Database Access or Retrieval (OIDAR) Services
For the import of Online Information and Database Access and Retrieval (OIDAR) services by unregistered, non-taxable recipients, the overseas supplier is liable for tax payment. This supplier must either register in India or appoint a representative within the country to handle GST remittance. More information can be found in our article about the place of supply of OIDAR.
Supplies to Special Economic Zone (SEZ) Units
The provision of goods, services, or both to a Special Economic Zone (SEZ) developer or an SEZ unit is categorized as an inter-state supply, thus attracting IGST.
