The Central Board of Indirect Taxes and Customs (‘CBIC’) issued Circular No. 210/4/2024-GST* *on 26.06.2024, providing crucial clarification on the valuation of the supply or import of services by a related person where the recipient is eligible for full input tax credit (‘ITC’). This circular responds to concerns raised by trade and industry regarding the tax treatment of such transactions under the Goods and Services Tax (‘GST’) regime.
Key Provisions of the Circular
The CBIC noted that certain field formations were raising demands on registered persons in India for tax on a reverse charge basis for activities undertaken by their related persons based outside India. These activities were classified as imports of services, even without any consideration. This interpretation stemmed from S. No. 4 of Sch. I of the Central Goods and Services Tax Act, 2017 (‘CGST Act’), which deems the import of services by a related person as a supply, even if made without consideration.
R. 28 of the CGST Rules, 2017
The circular reiterates r. 28 of the CGST Rules, 2017 (‘CGST Rules’), which specifies the method for valuing the supply of goods or services between distinct or related persons other than through an agent. According to this rule, the value should be the open market value or the value of similar goods or services if the open market value is not available. If these values are not determinable, the value should be determined using r. 30 or 31 of the CGST Rules.
Clarification on Valuation
Deemed Open Market Value: The second proviso to r. 28(1) states that if the recipient of the supply is eligible for full ITC, the value declared in the invoice is deemed to be the open market value of the goods or services.
Application to Related Persons: The CBIC clarifies that this provision applies to all supplies between distinct or related persons, including the import of services from a related person outside India. This ensures consistent treatment of domestic and cross-border transactions.
Reverse Charge Mechanism
For the import of services by a registered person in India from a related person located outside India, the registered person must pay tax on a reverse charge basis and issue a self-invoice under s. 31(3)(f) of the CGST Act.
Valuation in Absence of Invoice
If the related domestic entity issues no invoice for services provided by the foreign affiliate, the value of such services is deemed to be declared as Nil. This value is considered the open market value as per the second proviso to r. 28(1) of the CGST Rules.
Implementation and Trade Notices
The CBIC requests that suitable trade notices be issued to publicise the contents of this circular and ensure uniform implementation. The board should be informed of any difficulties in implementing these instructions.
Conclusion
This circular provides essential clarity on the valuation of services imported from related persons, ensuring consistent treatment for transactions where the recipient is eligible for full ITC. By deeming the invoice value as the open market value and addressing scenarios where no invoice is issued, the circular aims to simplify compliance and reduce disputes in this area.
Authored by Sanyam Aggarwal, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.
AUTHORED BY
More Insights
24-07-2026
10
min read
‘Shylockian’ Lending is ‘Squeezing of Blood’: NCLT Moves Beyond Debt & Default to Reject a Section 7 Application
In a rare departure from the conventional debt-and-default enquiry under section 7 of the IBC, the NCLT, Kochi Bench rejected the financial creditors' petition after characterizing the underlying arrangement as a ‘Shylockian system’ of lending. This court ruling discusses Shylockian lending and examines the strength of the Tribunal's focus on the economic substance of the transaction against established legal principles governing admission under section 7 of the IBC.
10-07-2026
7
min read
Faceless Reassessment after S. 147A: What the Supreme Court Did – and Did Not – Decide
The Supreme Court's decision in Tej Pratap Singh does not settle the JAO–FAO controversy. Following Parliament's retrospective insertion of s. 147A, it remands the issue to the High Courts for fresh consideration. Faceless reassessment was never merely about moving tax files from paper to portal; it fundamentally changed the statutory authority responsible for communicating with the taxpayer, examining the record, drafting the order and completing the assessment. The real question now is how far a retrospective legislative clarification can go.
22-06-2026
8
min read
Claim Admission is not Debt Acknowledgement: Supreme Court on RP’s Role & Limitation under the IBC
Can admission of a claim by a Resolution Professional extend limitation under section 18 of the Limitation Act? In Shankar Khandelwal v. Omkara Asset Reconstruction Pvt. Ltd., the Supreme Court answered this question in the negative, holding that claim admission during CIRP is merely a statutory claim-verification process and not an acknowledgement of debt. The ruling clarifies the RP’s non-adjudicatory role and reinforces important principles governing limitation under the IBC.