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How to Determine Place Of Supply of Service Under GST
Know the basics of place of supply in case of supply of services as per general provision guiding you to various pages on specific rules
How to Determine Place Of Supply of Service Under GST
Updated on : Jan 12, 2022 - 11:52:28 AM
10 min read.
Under the Goods and Services Tax (‘GST’) Law, the taxpayer is liable to pay tax at the time and as per the place of supply. The place of supply is the place of consumption of services.
Provisions regarding ‘Place of supply’ are explained under the IGST Act. ‘Place of Supply of Goods under GST’ is discussed separately in our article. This article will focus on the place of supply of services in general.
However, there are specific cases/rules for determining the place of supply for services rendered directly in relation to immovable property, transportation of goods, and many more specific services.
Importance of Place of SupplyLet us first understand why an accurate determination of place of supply is important for businesses. The reasons for this are listed below:
Wrong classification of supply between interstate or intra-state and vice-versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of CGST Act
Where wrong taxes have been paid on the basis of the wrong classification, a refund will have to be claimed by the taxpayer
The taxpayer will have to pay the correct tax along with interest for the delay on the basis of revised/correct classification
Also, correct determination of place of supply will help us in knowing the incidence of tax. As if the place of supply is determined as a place outside India, then tax will not have to be paid on that transaction
Determining The Place Of Supply Of Services
GST is destination-based tax i.e consumption tax, which means tax will be levied where goods and services are consumed and will accrue to that state. Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the ‘’place of supply’’ so determined and the location of the supplier, the respective tax will be levied.
IGST is levied where the transaction is inter-state, and CGST & SGST are levied where the transaction is intra-state. For understanding the place of supply for services, the following two concepts are very important namely:Location of the recipient of servicesLocation of the supplier of services
Let’s understand these two concepts in detail as they will form the base for determining the place of supply in case of the supply of services:
Location of the Recipient of ServicesS.No Case Location of Recipient of Service
A where a supply is received at a place of business for which the registration has been obtained such place of business
B where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere) such fixed establishment
C where a supply is received at more than one establishment, whether the place of business or fixed establishment the location of the establishment most directly concerned with the receipt of the supply
D in absence of such places the location of the usual place of residence of the recipient;
Location of the provider/supplier of servicesS.No Case Location of Supplier of Services
A where a supply is made from a place of business for which the registration has been obtained the location of such place of business
B where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere) the location of such fixed establishment;
C where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply
D in absence of such places, the location of the usual place of residence of the supplier;The transactions in terms of supply of services can be broadly categorized as below:
These are the transactions where both the parties i.e the supplier as well as the recipient of service are in India. Domestic transactions can be further categorised as below:
Inter-State (i.e between two different states)
Intra-State (i.e within the same state)General Rule: In general, the place of supply for services will be the location of the service recipient (the recipient needs to be a registered person).
In cases, where service is provided to an unregistered person, the place of supply will be the:
Location of the service recipient (if the address is available on record);
Otherwise, the location of the service provider
These are the transactions where either the service recipient or the provider is outside India. Transactions in which both the recipient as well as a provider are outside India are not covered here.General Rule: The Place of supply for services treated as international transactions shall be:
The location of the service recipient
In the case where the location of the service recipient is not available, the place of supply shall be the location of the supplier.
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Place of supply of services
How to determine place of supply in various supply of services as per Section 13(1) to 13(13) under IGST Law, 2017 Dear Colleagues, Greetings of the day. Today
Place of supply of services | Section 13(1) to 13(13) | IGST Act, 2017
| Goods and Services Tax - Articles
06 Nov 2020 68,313 Views 7 commentsHow to determine place of supply in various supply of services as per Section 13(1) to 13(13) under IGST Law, 2017
Dear Colleagues, Greetings of the day. Today I’m going to discuss about “How to determine place of supply in various supply of services under GST” under Sec.13 of IGST Act, 2017. Effective from 01.07.2017 many services are included under Tax Net in India. The Goods and Services Tax Act, 2017 is introduced all over India (Except Jammu and Kashmir up to 7.7.2017). In Jammu and Kashmir GST Act is been applicable from 8.7.2017.
Let us understand what is Place of supply? How to determine Place of supply in various services as per Section 13(1) to Sec.13(13) of IGST Act, 2017? What is the importance of Place of supply in Supply of services under GST Law?. Now we have to study the definitions of Important terms to apply GST Law on Place of supply in various services as per GST Law, 2017 for better understanding.Section 13 deals with the determination of place of supply of services where the Location of supplier of service or the Location of the recipient of services is outside India. The provisions of Sec 13 of IGST Acts to determine the Import and Export of Services in various types of Supply of Services.
The Goods and Services Tax is a destination based tax. The Government has designed to tax goods and Services under GST Law based on identifying whether the supply made is Inter Sate supply of services or Intra State supply.
In case of Inter State Supply of services Integrated Goods and Services Tax (IGST ) is applicable and in case of Intra State Supply of Service Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) is applicable.
As per Section 2(86) of the CGST Act, 2017, states that “Place of Supply” means the place of supply as referred to in Chapter –V of the Integrated Goods and Services Tax Act (IGST) 2017.What is the meaning of “Export of Service” under IGST Act,2017?
Export of Services is defined under Section 2(6) of the IGST Act,2017, Export of services means the supply of any service when:-
(a) The supplier of services is Located in India,
(b) The recipient of service is located outside India,
(c) The place of supply of service is outside India,
(d) The payment for such service has been received by the supplier of service in convertible foreign exchange, and
(e) The supplier of service and recipient of service are not merely establishments of a distinct person in accordance with explanation1 of Sec.8.Section 13 defines the place of supply of services in the following manner:-
(a) General Principle as per Section 13(2) of IGST Act,2017, and
(b) Specific Situations as per Section 13(3) to Section 13(13) of IGST Act,2017.A. General Principle.13(2) of IGST Act, 2017.
As per Section 13(2), generally the place of supply of services shall be the location of the recipient of service. However, if the location of the recipient of service is not available in the ordinary course of business, the place of supply shall be the location of the supplier of service.B. Specific Situation. Sec.13(3) to 13(13) of IGST Act, 2017:Section 13(3)(a) of IGST Act, 2017, deals with : Services supplied in respect of goods that are required to be made physically available by the recipient. The intention of this section is “Where the services are performed by the supplier of services on the goods that are made available by the recipient of services or any person acting on his behalf, then the place of supply where the services are performed shall be the place of supply. However, if the services are performed from a remote location through electronics means, the place of supply shall be the place where the goods were situated.
This provision does not cover situations where the goods are imported temporarily into India for repairs and are exported after repairs. Where the seller is provided in more than one location, including a location in taxable territory its place of supply shall be the location in the taxability territory as per Sec.13(6) of IGST Act,2017.Example:
M/s. Cheran Export & Imports, (Based out of USA )hires a service provider in India Manoj Imports & Exports, Kolkata, West Bengal to perform quality check on all its goods exported to India , Kolkata, West Bengal after clearance from the custom authorities. The goods will be supplied by its custom clearing agent ( M/s. Sundaram C&F agents) to perform quality check. In this case , place of supply for services provided by both Manoj Imports & Exports and M/s. Sundaram C&F Agents to Cheran Exports & Imports will be Kolkata, West Bengal.Specific Situation: Section 13(3)(b) of IGST Act,2017, deals with : Services supplied to an individual which require physical presence.
This section covers the scenario where the services supplied to an individual , represented either as the recipient of service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the recipient, with the supplier for the supply of the service.
Place of Supply of Services — Critical Analysis
Place of Supply of Services — Critical Analysis
Place of Supply of Services — Critical Analysis INTRODUCTION
The Goods and Services Tax [“GST”] is a destination based tax on consumption of goods and services i.e., the tax should accrue to the taxing authority which has jurisdiction over the place of consumption. For this purpose, one needs to determine what is popularly known as Place of Supply [“POS”] i.e. the place where goods or services have been supplied so as to decide the taxing jurisdiction. ‘Place of Supply of Services’ [“POSoS”] along with the ‘Location of Supplier of Service’ [“LS”] would determine whether the supply is intra-State or inter-State, that are the two types of supplies in GST but having different GST implications.
TYPES OF SUPPLY
Intra-State supply will be the case where the LS and POS are in the same State. Inter-State Supply would be a case where LS is in one state and POS is in another State. Since there are other kinds of Inter-State supply as well, for ease of reference we refer to this Inter-State supply as Domestic Inter-State supply.
There are four types of Inter-State supplies as envisaged by section 7 of the Integrated Goods and Services Tax Act, 2017 [“IGST Act”]:
Domestic Inter-State supply i.e. supply between two states.
Cross border supply.
Supply to or by a SEZ Developer; or SEZ Unit.
Non Intra-State supply not covered above.
Domestic Inter-State supply is a case where the LS and POS are:
In two different States; or
In two different Union Territories; or
One in a State and another in a Union Territory.N.B.: For ease of reference, while referring to Domestic POSoS in this article, the elucidation of the provisions will be in respect of (i) above though it would be the same for (ii) and (iii).
Cross Border supply of service will cover the following supply of services:
Import of Services. Export of Services.N.B.:
Import of services and export of services is separately explained in Annexure 1 attached.
On a perusal of the said Annexure 1, it will be noted that in respect of export of services under GST scenario, the condition of receipt of foreign convertible exchange is a must as against the current Place of Provision of Services Rules, 2012, where the said condition of receipt of foreign currency is relevant only to the extent of allowance of input credit in respect of services used for exports but service tax would not be payable even in the event of non-receipt of foreign convertible exchange.
PLACE OF SUPPLY OF SERVICES [“POSOS”]
The POSoS is the Heart of GST which is very likely to be subjected to “Attacks” post GST implementation. A proper study of POSoS may ensure “Bypass” ensuring no need of a “Stent” or a “Stunt”.
As explained in the earlier paragraphs, two factors are relevant to determine whether the supply is inter-State or intra-State viz. LS and POSoS. Further, as per the POSoS provisions, the basic principle is that the place of supply of service shall be the ‘Location of Recipient of service’ [“LR”]. However, exceptions have been provided in case of performance based services, immovable property based services, certain specified services and transportation service etc. where other criteria such as location of supplier of service, location of performance of service, location of immovable property etc. are relevant. Thus in effect, there would be three factors which are relevant in determining whether the supply is intra-State or inter-State viz.
LS; LR; and POSoS.
The ‘Location of Supplier of Service’ and ‘Location of Recipient of Service’ are defined separately in GST based on certain tests. Of course, these tests will really test the legal acumen of assessee, department and the judiciary in the years to come. In fact, to locate the LS or LR would be in many cases a Big Challenge. It is separately being dealt in Annexure 2 attached.
Once the LS and LR both are determined, it would be necessary to determine the POSoS in order to determine whether the supply is inter-State or intra-State.
Determining the POSoS has always been a challenging task world over. However, internationally, the POSoS is generally determined in a cross border transaction i.e. where either the Service provider or the Service recipient is abroad and the other is in home country. The GST in India is different due to its dual structure [i.e. Central Tax (“CT”) & State Tax (“ST”)]. Thus, the study of POSoS would involve:
Study of Domestic POSoS i.e. where LS and LR both are in India. [Section 12 of IGST Act]
Study of Cross Border POSoS i.e. where either LS or LR is outside India. [Section 13 of IGST Act]
Keeping in mind the constraints of space in this article, this part deals with the Domestic POSoS which is unique and has raised various challenges and issues. As regards the Cross border POSoS; they are similar to the existing Place of Provision of Service Rules, 2012 under the Service tax law, and hence are dealt with very briefly.
DOMESTIC PLACE OF SUPPLY OF SERVICE [SECTION 12 OF THE IGST ACT]
While the catchword is “One Nation, One Tax”, The Central Goods and Services Tax Act, 2017 [“CGST Act”] and The State Goods and Services Tax Act, 2017 [“SGST Act”] have been so designed that each State is an independent taxing jurisdiction. Each state has been ring fenced i.e. a tax paid in one State cannot be adjusted against tax liability of another State. Further, Inter-unit supply between a unit in one State to an unit in another State though belonging to the same entity is considered as supply. The LS and POS will also have far reaching impact on ultimate cost of goods and services based on the credit availability. Thus, the study of Domestic POSoS is most crucial to the business.