Question6:

Import of Service: XYZ(India) receiving services from PQR (Germany) on which paid GST under reverse charge and availed ITC of it. Subsequently, PQR issued Credit Note for excess amount charged and Debit Note for less amount charged. 1) Whether XYZ to pay GST on debit note amount and book credit note amount without GST? 2) For the credit note issued against which GST already paid under reverse charge and ITC availed, whether that ITC will be required to be reversed? Debit Note / Credit Note:XYZ(India) providing services to PQR (Germany) on which XYZ is paying GST. Subsequently, XYZ issued Credit Note for excess amount charged and Debit Note for less amount charged to PQR. 1) Whether XYZ need to pay GST on Debit Note issued? 2) Can XYZ adjust the GST excess paid for the credit note issued by showing GST in the Credit Note and then adjust it by showing in return?

Answer:

(A)  Once import of service is complete and due IGST has been paid on it, reduction in value or issuance of Credit Note by the foreign supplier of service is not going to impact payment of IGST already paid as the importer has already taken ITC of the equal amount. However, if the post import price is enhanced and Debit  Note is issued by the supplier, the importer will have to pay IGST on the enhanced amount and take credit of the differential amount paid, thus making the transaction revenue neutral. The importer will have to issue Credit Note in the earlier instance and Debit Note in later instance to settle his accounts by the amount involved.

(B)  From your question it is understood that export of service has been made on payment of IGST. The exporter is entitled to claim refund of IGST paid by him as export of service is zero rated under Section 16 of IGST Act, 2017. Now in case of increase of value of exported service, the exporter need not pay any more IGST, as in that event he will again claim refund of additional tax paid to make the transaction revenue neutral. Hence, he may raise a Debit Note for the enhanced value of service only to settle his accounts. In case the value has been reduced after the export of service, no further tax be paid as appropriate tax at the time of export is already paid. There is no provision for adjustment of credit under GST law in cases of escalation/reduction of price after the export has taken place. Debit/Credit Notes need to be issued for settlement of accounts. It may be added here that any service can be exported under LUT as Section 16(3)(a) of IGST Act, 2017 places export of service at par with export of goods and both can be exported under LUT or Bond. If export is made under LUT, then complexity of payment/refund of IGST will not be required to be faced. (Reply dt. 04/12/2017)