Foreign Affiliate Services to related Domestic Entities with full ITC Availability deemed as Open Market Value: CBIC issues Circular

The Central Board of Indirect Taxes and Customs clarified the valuation of imported services from related parties under the CGST Act, 2017. It addressed concerns about demands raised for tax on reverse charge basis by some field formations, despite no consideration being involved in services provided by foreign entities to related parties in India. The clarification extends principles similar to those applied to domestic transactions involving distinct persons to international scenarios, ensuring uniformity. Under Rule 28(1) of the CGST Rules, the invoice value is deemed the open market value for services between related parties if the recipient is eligible for full input tax credit. It mandates self-invoicing and tax payment under reverse charge by the recipient in India for such imports. Trade notices were recommended to disseminate these clarifications widely.