04 June 2021
Sea going Vessel is owned by Foreign Principal and operations are handled by Indian Agent Crew members on the vessel are signed on and signed off. Hotel stay is arranged for these crew members and Hotel raises tax invoice on Indian agent at applicable GST 5%, 12% etc. This Invoice in turn is charged on Foreign vessel owner by raising tax invoice. My question is Indian Agent should charge IGST at what rate and Whether input gst credit is available to Indian Agent ?
11 July 2024
In the scenario described, where an Indian agent is handling operations for a sea-going vessel owned by a foreign principal, and hotel stay for crew members is arranged with invoices raised by the hotel to the Indian agent, here’s how GST (Goods and Services Tax) would typically apply:
1. **GST Applicable on Hotel Invoice to Indian Agent:** - The hotel raises tax invoices on the Indian agent for the services provided (hotel stay). The GST rate applicable on these services (hotel stay) depends on the nature of the accommodation and other factors: - For accommodation in hotels charging room tariff of Rs. 1,000 and above per night, GST rates typically range from 12% to 18%, depending on the classification of the hotel. - If the hotel charges below Rs. 1,000 per night, it falls under a concessional rate category where GST is 0% or 5%.
- The GST rate charged by the hotel (whether 5%, 12%, or 18%) will be applicable to the invoices raised on the Indian agent.
2. **IGST Applicable by Indian Agent to Foreign Principal:** - The Indian agent, when billing the foreign vessel owner (foreign principal), will charge Integrated Goods and Services Tax (IGST) on the invoice raised for services rendered. - IGST is typically charged at the rate applicable to the service provided, which in this case would be based on the GST rate charged by the hotel to the Indian agent.
3. **Input Tax Credit (ITC) for Indian Agent:** - Yes, the Indian agent can claim Input Tax Credit (ITC) on the GST paid on the hotel invoices. This means that the GST paid to the hotel can be offset against the IGST liability when billing the foreign principal. - To claim ITC, the Indian agent must have valid tax invoices issued by the hotel and must satisfy other conditions as per the GST rules, including ensuring that the input services are used in the course or furtherance of business.
**Example Calculation:** - Suppose the hotel charges GST at 18% on its invoice to the Indian agent for the crew members' hotel stay. - The Indian agent will then charge IGST at 18% when billing the foreign vessel owner for the services provided (including the hotel stay). - The Indian agent can claim ITC for the GST paid to the hotel against the IGST liability charged to the foreign vessel owner.
**Conclusion:** - The Indian agent should charge IGST at the rate applicable to the services provided (based on the GST rate charged by the hotel). - Input GST credit is available to the Indian agent, allowing them to offset the GST paid on hotel invoices against the IGST liability when billing the foreign principal.
This ensures compliance with GST regulations and allows for the proper utilization of input tax credit, benefiting both the Indian agent and the foreign vessel owner in terms of tax efficiency.
CAclubindia
