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GST – A Work in Progress for International Transactions

By Siffat Kaur, Ashwani & Associates

VAT and GST all over the world has evolved in a fragmented manner. This has resulted in a variety of models emerging, under which the tax levies are based on different principles in different countries. The ability to trade services across borders is a more recent development and one which is not always easily assimilated into current models. Implementation of GST in India was touted as a tool for accelerating the pace of tax legislation by taxing every value addition. However, taxing the cross-border transactions still continues to place strain on the jurisdictional authorities.

The OECD, in its Pillar TWO approach, proposed a new nexus-based concept, circumventing dependence on physical presence and taking jurisdictionbased sales as a basis, ensuring that businesses having a global presence are taxed on the economic nexus of their sales and not only where they are physically present. Although India has always been at the forefront in adopting international best practices, as suggested by OECD, it seems to have failed in the current scenario.

Like any other indirect tax regime, the law was intended to provide mammoth incentives to export houses, including refunds. However, to the dismay of every taxpayer, the legislation has still proved to be a work-in-progress for international transactions; whether it be restricting refunds of credit on capital goods, or late processing of refunds, or the gruelling process of obtaining a Letter of Undertaking.

The Act defines import of services to occur when the supplier is outside India and the recipient and place of supply in India. However, the regime has so far been unable to put in place a control over the taxability of import of services due to a lack of a proper mechanism and adequate systems. Further, on account of an upsurge in the current pandemic situation, ‘OIDAR’ services have gained much popularity, but this Pandora’s box still remains a grey area.

It cannot be denied that Indian GST began with a magnificence as great as a carnival; however, the magic that it was supposed to demonstrate in the case of crossborder transactions is still awaited.

Siffat Kaur

Siffat Kaur

GGI member firm
Ashwani & Associates, Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax
Ludhiana, India
T: +91 98554 00428
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Ashwani & Associates, Chartered Accountants is an audit, tax, and consulting firm in India with three offices. Their clients range from emerging entities to large corporations with billions of dollars as revenue. They include privately held businesses, not-for-profit organisations, and publicly traded companies. Ashwani & Associates support a local, national, and international client base.

Siffat Kaur is a B Com ACA specialising in VAT/GST consulting in cross-border business in India and abroad. She thus has experience and a vast working knowledge of all aspects of service tax, trade law, VAT, and the like. Serving clients from national and international companies and having worked in every existing kind of indirect tax branch, she offers pragmatic solutions on a cost-effective basis.

Published: Indirect Taxes Newsletter, No. 11 Autumn 2020 l Photo: Noppasinw -

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