CBIC Circular 210/4/2024-GST: Valuation of Imported Services by Related Persons

The CBIC has issued Circular No. 210/4/2024-GST dated June 26, 2024, providing clarifications on the valuation of imported services supplied by a related person, where the recipient in India is eligible for full input tax credit (ITC).

Under Schedule I of the Central Goods and Services Tax Act, 2017, import of services from a related person outside India is considered a taxable supply, even if no consideration is involved. Recently, concerns were raised by trade and industry regarding tax demands imposed by some field formations on such transactions, treating them as taxable under the reverse charge mechanism, despite the absence of consideration and non-recognition of supply by the foreign related entity.

In response, the CBIC clarifies that according to Rule 28(1) of the CGST Rules, where goods or services are supplied between related persons and the recipient is eligible for full ITC, the value declared in the invoice by the supplier is deemed to be the open market value. This principle, reiterated in Circular No. 199/11/2023-GST, extends to services provided by foreign entities to their related parties in India.

For imports of services from a foreign affiliate by a registered entity in India, subject to reverse charge mechanism, the recipient must self-invoice and pay taxes accordingly. If no invoice is issued by the domestic recipient for a specific service, it may be deemed as having a nil value, aligning with the second proviso to Rule 28(1) of the CGST Rules.

Trade notices are advised to disseminate the circular’s contents effectively.