If taxpayer’s clients at abroad supply inputs for job work and the same has been imported without payment of duties of Customs in terms of Notification 32/1997 Customs. And after the undertaking the job work of assembly in India the resultant goods were returned back to the client and job work charges are collected. Then this service is not exempted (before 01 Feb 2019).
Since the job work activity is done in India, the place of provision of service is in India, in terms of Section 13(3)(a) of IGST Act 2017, which is reproduced below for reference.
Place of supply of services where location of supplier or location of recipient is outside India
(3) The place of supply of the following services shall be the location where the services are actually performed, namely:—
(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:
Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:
Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs;
A new proviso was added vide IGST Amendment Act 2018 (32 of 2018) in section 13(3)(a) of IGST Act 2017, which takes effective only from 01-02-2019 as per notification No. 01/2019 Integrated Tax dated 29-01-2019. As per this proviso, application of Section 13(3)(a) was excluded, for the cases similar to the present issue. The new proviso is set-out for reference below:
“Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or any other treatment or any process and are exported after such repairs or treatment or process without being put to any other use in India, than that which is required for such repairs or treatment or process”.
Conclusion: From 01 July 2017 to 31 Jan 2019, this job work service was not exempted and hence IGST needs to be paid under RCM.