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A registered Indian company receives consultancy services, for use in its business, free of charge from an unrelated firm located abroad. Is this import of services a supply under the CGST Act, 2017?

Question and options

A registered Indian company receives consultancy services, for use in its business, free of charge from an unrelated firm located abroad. Is this import of services a supply under the CGST Act, 2017?

  1. No, because a free import of services is a supply only when it comes from a related person or the recipient's own foreign establishment

  2. Yes, because Schedule I treats a free import of services for the recipient's business as a supply, whoever the supplier is

  3. Yes, because tax on imported services is payable by the recipient under reverse charge, whether or not consideration is paid

  4. No, because an import of services is a supply only if consideration is paid for it, whoever the supplier is

Answer and explanation

Correct answer: A - No, because a free import of services is a supply only when it comes from a related person or the recipient's own foreign establishment

Section 7(1)(b) of the CGST Act, 2017 makes an import of services a supply when it is for consideration, and paragraph 4 of Schedule I adds free imports only when they come from a related person or from the taxable person's other establishments outside India, in the course or furtherance of business. An unrelated foreign firm giving free advice falls under neither rule. Schedule I does not reach every free business import, and reverse charge applies only where there is a supply in the first place.

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