Let's suppose an Indian company is providing marketing services in India to a client situated in Germany. the service is regarding creating customer in India. Now the question is whether the company is eligible for ITC
Well! the case looks a bit complicated but it isn’t. To get the answer to the question is like hunting for the treasure, so let’ walk step by step to reach to the answer to the question (Treasure).
To reach to the answer to the question the sections that we are going to refer are section 13 and section 16 of the IGST act
First of all, we need to determine the place of supply and section 13 of the IGST act can help us in doing the same.
Section 13 of the GST act basically deals with determination of place of supply in case of either of the recipient or supplier’s location is outside India
Sub section 2 of section 13 has clearly provided that the place of supply shall be location of recipient of service .in case location of recipient of service is not available location of supplier of service should be considered as place of supply.
Also, there are certain services which are provided in sub section 3 of section 13 to sub section 13 of section 13 where the place of supply will be determined as the law provides .
So first of all let's discuss section 13 (3)
This section provides that, in case of
a) services supplied for goods which are required to be made available to the supplier (for eg ., repairment service provided by the company situated outside India to India)
b) or services supplied to an individual whose presence is required for the supply of service (for eg:- salon service, hair transplant service etc
place of supply will be place where services are performed .
Now there is an exception to this section i.e,Repairing services provided by importing good in India and exporting it back. This exception has placed so that the Indian companies providing services to overseas company in respect of repair etc should not face hastle
So in case of service of personalized nature i.e, service related to good or service which need the presence of recipient, the place of supply will be the place where service are performed
Now , section 13(4)to section 13(13) we can understand by below mentioned table
|
Sec |
Condition |
Place of Supply (POS) |
|
13(4) |
Supply of service directly on immovable property (includes experts renting, architect, interior design etc.) |
POS = Place where immovable property located or intended to be located. |
|
13(5) |
Admission/Organisation to events including ancillary services |
POS = Place where event is actually held |
|
13(6) |
Supply of service u/s 13(3), (4),(5) in multiple taxable territory |
POS = Taxable territory Entire contract in taxable territory |
|
13(7) |
Supply of service u/s 13(3), (4), (5) more than 1 state/UT |
POS = supply in each respective State |
|
13(8) |
Supply by banks/FI/NBFC to A/c holders - Intermediary services- Hiring all means of transport upto 1 M other than vessel or Aircraft |
POS = Location of supplier of Service |
|
13(9) |
Transportation of goods other than mail or courier |
POS = Place of destination of Goods |
|
13(10) |
Passenger transport service |
POS = Place where passenger embarks for continues journey |
|
13(11) |
On board supply of services |
POS = First scheduled point of departure of conveyance |
|
13(12) |
OIDAR Service |
POS = Location of Recipient |
|
13(13) |
Government power to notify any services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service |
|
Since the marketing service provided to an overseas company is'nt covered in the services listed from sub section 3 to 13 of section 13. so it implies that place of supply will be Location of recipient.
Now the next question is whether ITC will be available or not.
Since the place of supply is place of recipient i.e, outside India hence this is the case of Export of service.
For the same refer section 16(1) which defines zero rated supply.
this section provides that
zero rated supply” means any of the following supplies of goods or services or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
Hence marketing service provided to any overseas company is zero rated supply.
Further, Sub section 2 of section 16 provides that the credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply
Also, sub section 3 of section 16 provides that A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,
So , the Conclusion is , ITC can be availed on marketing service provided to the overseas company in India.
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