GST – a work in progress for international transactions

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.

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