Overseas sub-contracted projects may not be tax free in India

Rendering of service even for international projects would be taxed in India if the location of main contractor is in the country.

Such supply will be treated as local supply in this case and chargeable at the applicable GST rates.

According to a ruling by the Telangana Authority for Advance Ruling, if the supplier of a service does not have any successive relationship with an overseas recipient of service but the supply is linked to an entity having its headquarters in India, the supply will be deemed to have taken place within the country, and therefore taxable.

The ruling had been given on an application of Avantika Contracts that constructed an Institute of Security and Law Enforcement studies at Addu City in the Maldives. The company contended that since the supply of services is outside India, GST should not be applicable on it.


But the AAR ruled that though construction by Avantika Contracts is for an immovable property in the Maldives, it has rendered such service being sub-contracted the job for the building by he National Building Construction Corporation (NBCC) that received the order for construction of the institute from the Indian government which signed an MoU for the project with the Maldives government.

And, since the location of both Avantika and the NBCC are in India, supply by the subcontractor is actually to the main contractor NBCC and redefining such supply of service would become taxable under GST in India.

The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient. Therefore, the supply by the applicant to the NBCCL is within the ambit of GST, the AAR ruled.-IANS