NEW RCM: PLACE OF SUPPLY CHANGES FOR INDIAN EXPORTERS AS OF 01/10/23

Clarification on a number of matters pertaining to the Indian exporter’s place of supply as of 1/2010/23 Novel RCM Relevant: The Indian government implemented a new reverse charge mechanism (RCM) on October 1, 2023, which has a big effect on exporters from India. The adjustments have to do with where specific services are supplied in relation to the export of products and services.

Understanding the New RCM for Indian Exporters W.E.F. 01/10/23

Background

Changes were introduced by the Finance Act, 2023, dated March 31, 2023, and they became operative on October 1, 2023. The IGST Act, 2017’s Section 13 was the particular target of these modifications.

 

RCM

Change in the Place of Supply (POS)

The modification of the Place of Supply (POS) for services connected to the transportation of products is one of the major modifications brought about by these amendments. In the past, the commodities’ final destination served as the point of sale for these services. This has been changed, though, and according to Section 13(2) of the IGST Act, the new POS is “the location of the recipient of services.”

Section 13(2) reads as follows:

“13(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the regular course of business, the place of supply shall be the location of the supplier of services.”

Implications for Indian Exporters

The place of supply will now be identified as the location of the Indian exporter for exporters who ship their goods through international shipping lines due to changes in the POS regulations. Reverse Charge Mechanism (RCM) will therefore be used for these transactions.

RCM Application

Indian exporters would be liable for paying the relevant Integrated Goods and Services Tax (IGST) on these transactions due to the implementation of RCM. The applicable tax legislation shall be followed for determining the IGST rate and the particular requirements for application.

 

RCM

 

Additional Considerations

Ads and co-location services are among the other services covered by the new RCM in addition to the modifications made to the POS for transportation services. Indian exporters must make sure they are complying with the new laws and be informed of these changes.

 

Read More: Section 115BAC of Income Tax Act, 1961 : An Overview of the New Tax Regime

 

Conditional IGST Exemption for Vessels

When foreign flag vessels change to coastal run, the GST Council has suggested a conditional IGST exemption, provided that they return to foreign going status within six months.