Clarification on the valuation of supply of import of services by a related person where the recipient is eligible to full input tax credit.

What’s New?
GST Valuation Clarified for Services from Overseas Affiliates
Key Takeaways for Business Owners:

1. Background:
   When a business in India receives services from a related entity overseas (like a parent company
   or sister company), it is considered a supply under GST law, even if no payment is made for these
   services.
2. Issue Raised:
   Businesses reported that tax demands were being raised for such services, even when no actual
   the transaction occurred, and no payment was made.
3. Clarification Provided:
   The government has clarified that if the Indian business can claim full input tax credit (ITC), the
   value declared on the invoice for these services will be accepted as the market value.
   This rule aligns with previous guidance on services exchanged between different offices of the
   same organization within India.
4. Important Points to Note:
   – Invoice Declaration: If you receive services from an overseas related party and are
   eligible for full ITC, the invoice value will be considered the market value.
   – No Invoice Issued: If no invoice is issued for the services received, the value can be
   treated as zero for tax purposes, provided you are eligible for full ITC.
5. Impact on Your Business:
   Simplifies the tax compliance process for services received from related parties abroad.
   Ensures uniform treatment of domestic and international related party transactions under GST.
   Reduces potential tax disputes and demands for businesses eligible for full ITC.