GST: Request for details on FOC software imports from related party
Blog: NASSCOM Official Blog
This is with reference to levy of GST on import of free of cost (FOC) services from related parties. We understand that there have been a number of enquiries initiated by GST authorities, particularly Directorate General of GST Intelligence (DGGI), in the recent past seeking details of cross-border FOC supplies of software between related parties. In fact this issue was highlighted by the CBIC Chairman in his communication dated 27 April, 2020 wherein he mentioned about an important case involving non-payment of IGST on FOC import of software by a major software company whose sister company is based abroad.
Taking cognizance of the magnitude of the issue, we had earlier submitted a representation to GST Policy Wing. In view of increase in number of enquiring, we have initiated discussions with Mr Yogendra Garg, Principle Commissioner, GST Policy, CBIC to resolve the issue. During the course of our discussion with Mr Garg, we had put across the fact that access to software provided by overseas affiliates to Indian counterparts are usually for the limited purpose of enabling provision of services. Such software is not used for any commercial exploitation. Hence, software provided by overseas affiliate which is used for providing back to the overseas affiliated cannot be considered as an independent supply under the GST law. As a result, such supplies do not get covered under entry 4 of Schedule I of CGST Act.
However, in order to justify this fact and to enable the authorities to take a stand on the matter, Mr. Garg has requested NASSCOM to submit a representation along with the following documentation:
- Cases where the notices have been issued by authorities with specific details;
- Copies of contracts / relevant extract of the contract entered by Indian companies with their overseas affiliates (names of parties and other sensitive information may be blanked out).
- Specifically, Mr. Garg is keen to see if the contract states that software is to be provided by service recipient for performing the specific services.
We request you to kindly share the above mentioned details before June 15, 2020, in order to help present our case in a more holistic way and work towards an early resolution.
We look forward to hearing from you as we propose to submit these details at the earliest.