Clarification on various issues related to place of supply for Indian exporter w.e.f 01/10/23 New RCM Applicable- Effective from October 1, 2023, the Indian government has introduced a new reverse charge mechanism (RCM) that significantly impacts Indian exporters. The changes are related to the determination of the place of supply for certain services in the context of the export of goods and services.

Finance Act, 2023, Dated 31-03-2023, introduced amendments that came into effect on October 1, 2023. These amendments specifically pertained to Section 13 of the IGST Act, 2017.

Change in the Place of Supply (POS):

The key changes resulting from these amendments is the alteration of the Place of Supply (POS) for services related to the transportation of goods. Previously, the POS for these services was the place of destination of the goods. However, this has been modified, and the new POS is "the location of the recipient of services," as stated in Section 13(2) of the IGST Act.

Section 13(2) reads as follows:

"(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:

With the change in the POS rules, Indian exporters who export goods through foreign shipping lines will now have the place of supply determined as the location of the Indian exporter. As a result, Reverse Charge Mechanism (RCM) will be applicable to these transactions.

RCM Application:

The application of RCM means that Indian exporters will be responsible for paying the applicable Integrated Goods and Services Tax (IGST) on these transactions. The rate of IGST and specific conditions for application should be in accordance with relevant tax regulations.

Additional Considerations:

In addition to the changes in the POS for transportation services, the new RCM also applies to other services, including advertisement services and co-location services. Indian exporters need to be aware of these changes and ensure compliance with the updated regulations.

Conditional IGST Exemption for Vessels:

Foreign-going vessels may be subject to IGST if they convert to coastal run. However, the GST Council has recommended a conditional IGST exemption for foreign flag foreign-going vessels when they convert to coastal run, subject to their reversion to foreign-going status within six months.

Conclusion:

The introduction of a new reverse charge mechanism for Indian exporters and the change in the place of supply rules have significant implications for the export of goods and services. It's essential for exporters to understand these changes, comply with the updated regulations, and be aware of the specific conditions and exemptions that may apply, such as those related to vessels. Adhering to these changes is crucial to ensure smooth operations and compliance with tax laws.

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(Note: Information compiled above is based on my understanding and review. Any suggestions to improve above information are welcome with folded hands, with appreciation in advance. All readers are requested to form their considered views based on their own study before deciding conclusively in the matter. Team BRQ ASSOCIATES & Author disclaim all liability in respect to actions taken or not taken based on any or all the contents of this article to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.)

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