IGST Section 21 — Import of services made on or after the appointed day

Section 21 of the IGST Act clarifies how Goods and Services Tax (GST) applies to import of services when the transaction straddles the pre-GST and post-GST periods. Essentially, it states that IGST is applicable on import of services made on or after the "appointed day" (the date GST came into effect), regardless of when the import process began.

This section applies to any individual or business importing services into India on or after the "appointed day," which is generally understood to be July 1, 2017, when GST was implemented. This includes instances where the process of importing services might have started before July 1, 2017, but the actual import (i.e., the service being rendered and/or payment being due) took place on or after that date.

Here's a breakdown of the key conditions and exceptions:

• IGST Applicability: If the import of services occurred on or after the appointed day, IGST applies under the IGST Act, regardless of when the initial transaction or agreement was initiated.

• Full Tax Payment under Existing Law: If the entire tax liability related to the import of services was already paid under the previous indirect tax regime (e.g., Service Tax) before the appointed day, then no IGST is payable under the new GST law. This prevents double taxation.

• Partial Tax Payment under Existing Law: If only a portion of the tax liability was paid under the previous law before the appointed day, then only the remaining balance of the tax amount is payable under the IGST Act.

• Initiation of Transaction: A transaction is considered to be "initiated before the appointed day" if either:

  • The invoice related to the supply of services was received before the appointed day, or
  • Payment for the service, either in full or in part, was made before the appointed day.

Let's illustrate this with a couple of practical examples:

Example 1: Service Imported Post-GST, No Prior Payment

Imagine a software company in India contracted with a design firm in the US for website development in June 2017. The agreement was signed on June 15, 2017. The website development was completed and invoiced on July 10, 2017. Since the service was rendered and invoiced after July 1, 2017 (the appointed day), IGST would be applicable, even though the contract was signed before GST came into effect.

Example 2: Service Imported Post-GST, Partial Payment Pre-GST

Consider a consulting firm in India engaged a UK-based consultant for strategic advice in May 2017. The agreement stipulated a total fee of INR 10,00,000. The Indian firm paid an advance of INR 3,00,000 on June 25, 2017, and the service was fully provided in July 2017. In this case, since a partial payment was made before July 1, 2017, tax would be applicable only on the remaining amount of INR 7,00,000. You will need to calculate the tax under the IGST Act. The credit for the partial payment under the pre-GST regime is a different matter and might require further consideration under the transitional provisions of the GST law.

Important Considerations:

It's crucial to maintain proper documentation, including invoices, payment records, and service agreements, to accurately determine the applicability of Section 21 and avoid any disputes with tax authorities. Businesses should also carefully evaluate the transitional provisions of the GST law to understand how pre-GST credits and liabilities are to be treated under the new regime.

Amendments (if any):

As of my last update, I am not aware of any specific amendments made directly to Section 21 of the IGST Act, 2017 since its enactment. However, it's always advisable to refer to the latest official notifications and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) for any updates or clarifications related to this section or the IGST Act in general. You should seek advice from a qualified tax professional for specific situations to ensure that you are meeting your tax obligations correctly.