GST under RCM on Transfer Pricing

Hi Jakir,

Regarding GST under Reverse Charge Mechanism (RCM) on reimbursements to your Abu Dhabi branch:

1. Is GST under RCM applicable?

• Generally, when you receive services from a foreign branch (which is a related party outside India), the supply is considered an import of services under GST.

• As per GST law, import of services is liable to GST under RCM. So yes, GST is applicable under RCM on such reimbursements if they qualify as services.

2. What is the nature of services?

• It depends on the nature of the services provided by your Abu Dhabi branch (e.g., consultancy, technical services, administrative services, etc.).

• You should identify the correct SAC (Service Accounting Code) based on the service type.

3. HSN/SAC Code and Rate

• For import of general services, you can use SAC codes relevant to the service (consultancy, professional, technical services, etc.).

• The GST rate is usually 18% on import of services unless specified otherwise.

4. Valuation for GST under RCM

• GST is payable on the value of supply in INR, which should be the equivalent of the foreign currency amount at the exchange rate notified by the RBI on the date of invoice.

5. Input Tax Credit (ITC)

• ITC on GST paid under RCM can be claimed subject to the normal GST rules.

Summary:

• GST under RCM applies on import of services from foreign branch (related party).

• Rate: 18% (standard rate for most services)

• SAC code: Depends on service nature (e.g., 9983 for Professional Services)

• Value: Invoice amount converted to INR