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Place of Supply : IGST Act, 2017

Jun 01, 2017

1.FUNDAMENTAL ISSUES

1.1.Dual nature of GST

GST is destination tax has two components one is Central Tax and other is State Tax. In the course of Intra-State Supply(Intra-UT Supply), CGST and SGST shall be payable, these two components shall be collected and segregate by taxpayers, collect GSTon the otherhandin the course of Inter-state transactions IGST (Integrated Goods and Services Tax) shall be payable, in this case the tax shall be collected by the Taxpayer and shall be segregated at the end of regulator, who shall transfer the State’s share to the State where the goods/services shall be consumed.

1.2. SIGNIFICANCE OF PLACE OF SUPPLY:

The dual GST framework is structured on the destination principle, hence the tax base shifts from production to consumption. Under this system if goods/service provided from one state to another, the recipient of goods or services will be liable to state tax (GST) to the State where the goods received/consumed, though supplier will remain liable to collect tax.

Place of supply rules in GST are important to determine the jurisdiction where a supply of goods and/or services is to be taxed. The determination of place of supply is very important to eliminate potential disputes regarding double taxation and double non-taxation of a supply.

2.STATUTORY PROVISIONS

Section 2(86) of CGST Act, 2017 and SGST Acts defined the term place of supply as under:

2.1 “Place of Supply”: Section 2(86): means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act.

Thus what shall be the place of supply shall be determined under Chapter V of IGST Act, 2017.

2.2 Chapter V of IGST Act, 2017 contains the following sections:

Section 10: Place of supply of goods other than supply of goods imported into, or exported from India; 2.3

Section 11: Place of supply of goods imported into, or exported from India; 2.4

Section 12: Place of supply of services where location of supplier and recipient is in India; 2.5

Section 13 :Place of supply of services where location of supplier or locationof recipient is outside India. 2.6

2.3 Section 10: Place of supply of goods (other than supply of goods imported into, or exported from India):

Section 10 provides principle to determine the place of supply of goods. Section 10(1) (a) to (d) deals with the determination of place of supply under different circumstances and Section 10(2) deals with situation in relation to residual matters.

Section 10(1): The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under:–

2.3.1 Supply involves movement of goods: Section 10(1)(a)

Place of Supply: Location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

2.3.2 Goods delivered on the Direction of a third person:Section 10(1)(b)

Place of Supply: The principal place of business of Third person

• This would also covers sale in transit by transfer of documents of title.

• This clause would also covers when goods are sent to job worker on the instructions of ‘principal’: where input sent to Job-worker by supplier of principal, the place of supply shall be the principal place of business of the principal.

2.3.3 Supply does not involve movement of goods:Section 10(1)(c)

Place of Supply: Location of such goods at the time of the delivery to the recipient.

2.3.4 Goods are assembled or installed at site:Section 10(1)(d)

Place of Supply: Place of such installation or assembly

2.3.5 Goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle:Section 10(1)(e)

Place of Supply: Location at which such goods are taken on board

2.3.6 Section 10(2): Residual provision

Where the place of supply of goods cannot be determined:

Place of Supply: the place of supply shall be determined in such manner as may be prescribed.

2.4 Place of supply of goods imported into, or exported from India: Section 11

The place of supply of goods,––

(a) imported into India shall be the location of the importer;

(b) exported from India shall be the location outside India.

2.5 Place of supply of services where location of supplier and recipient is in India:Section 12.

Section 12 is a set of principles to determine the place of supply of different classes service, it contains 12(1) to 12(14) sub-sections each of them deals with a separate class of service.

Place of supply: The location of supplier of services and the location of the recipient of services is in India – shall determine under the Section 12.

2.5.1 General Services Section 12(2)[other than those fall under Section 12(3) to (14)]

The place of supply of services made to:

a. A registered person:

Place of Supply: Location of registered person.

b. Any person other than a registered person

Place of Supply:

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases

2.5.2 Services in relation to an immovable property: Section 12(3)(a)

Place of supply:Location at which the immovable propertyis located or intended to be located.

• Location of the immovable property is located or intended to be located outside India: Location of the recipient.

• Location of the immovable property is located or intended to be located in more than one State or Union territory.The supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately on the basis of contract or any other method as may be prescribed.

The service in relation to an immovable property shall include the services provided by:

• architects,

• interior

• decorators,

• surveyors,

• engineers and other related experts or

• estate agents,

• any service provided by way of grant of rights to use immovable property or

• for carrying out or co-ordination of construction work.

2.5.3 Services of Lodging accommodation by a Hotel/inn/guest house/home stay/ club or campsite, including a house boat or any other vessel.Section 12(3)(b):

Place of supply:Location at which the immovable property or boat or vessel, as the case may be, is located

• Location of the boat/ vessel is located or intended to be located outside India :Place of Supply: Location of the recipient.

• Location of the boat/vessel is located or intended to be located in more than one State or Union territory: The supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately on the basis of contract or any other method as may be prescribed.

2.5.4 Services by way of accommodation in any immovable property for: Section 12(3)(c)

• organising any marriage;

• reception or matters related thereto;

• official, social, cultural, religious or business function or

• other related services

Place of supply: Location at which the immovable property is located or intended to be located.

2.5.5 Any services ancillary to the services referred to in clauses (a), (b) and (c): Section 12(3)(d)

Place of supply: Location at which the immovable property or boat or vessel, as the case may be, is located.

2.5.6 Restaurant and catering services/Personal grooming/Fitness/Beauty treatment;

Health service including cosmetic and plastic surgery: Section 12(4):

Place of supply: Location where the services are actually performed.

2.5.7 Service in relation to training and performance appraisal Section 12(5)

Place of supply:

(a) when it is provided to a registered person: Location of such person;

(b) when it is provided to a person other than a registered person: Location where the services are actually performed.

2.5.8 Service provided by way of admission to a cultural/ artistic/sporting/ scientific /educational/entertainment event/amusement park or any other place and services ancillary thereto. Section 12(6)

Place of supply:

• Place where the event is actually held; or

• Place where the park or such other place is located.

2.5.9 Service provided by way of

a. Organisation of a cultural, artistic, sporting, scientific, educational or entertainment event;

b. supply of services in relation to a conference, fair, exhibition, celebration or similar events; or

c. Ancillary services [Section 12(7)]

Place of supply:

• Services provided to a registered person: Location of person

• Services provided to a non-registered person : place where the event is actually held; and

• If the event is held outside India: Location of the recipient. (Irrespective to the whether it is provided to a registered person or a non-registered person).

Note:

Where the above said events are held in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such event, the Place of Supply in that cases shall be The supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately on the basis of contract or any other method as may be prescribed.

2.5.10 Service provided by way of Passenger transportation service: Section 12(10)

Place of Services:

• Services provided to a registered person: Location of person

• Services provided to a non-registered person: place where the passenger embarks on the conveyance for a continuous journey.

2.5.11 Service for future right to passage: Section 12(10):

Place of Supply:

Shall be treated as per Section 12(2), i.e.,

Service provided to:

• A registered person: Location of registered person.

• A non-registered person:

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases

2.5.11 Services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle Section 12(10)

Place of supply: Location of the first scheduled point of departure of that conveyance for the journey.

2.5.12 Telecommunication Services:

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2.5.13 Banking and other financial services, including stock broking services to any person. Section 12(12)

Place of Supply:

• Location of the recipient of services on the records of the supplier of services.

• The location of recipient of services is not on the records of the supplier: The location of the supplier of services.

2.5.14 insurance services Section 12(13)

Place of supply:

• To a registered person: Location of such person;

• To a person a non-registered person: The location of the recipient of services on the records of the supplier of services.

2.5.15 Supply of advertisement services to the Central Government/State Government/a statutory body/a local authority meant for the States or Union territories identified in the contract or agreement. Section 12(14)

Place of Supply:

Each of such States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the amount under the contract or where no such contract, on such other basis as may be prescribed.

2.6 Place of supply of services where location of supplier or location of recipient is outside India: Section 13

Section 13 is a set of principles to determine the place of supply of different classes service where ‘location of supplier’/’location of recipient’, is outside India. it contains 13(1) to 13(13) sub-sections each of them deals with a separate class of service.

Place of supply: The location of supplier of services where ‘location of supplier’/’location of recipient’, is outside India – shall determine under the Section 13. [Section 13(1)]: Section 13(1) excludes other rules or regulation to interfere into the determination of place of supply where ‘location of supplier’/’location of recipient’, is outside India and provides that it shall be determined only under Section 13 or rules and regulation made there under.

2.6.1 General Services Section 13(2)[other than those fall under Section 12(3) to (13)]

The place of supply of services made to:

a. address of recipient on record exists:

Place of Supply: The location of the recipient.

b. Where the location of the recipient of services is not available

Place of Supply: Location of the supplier of services.

2.6.2 Services supplied in respect of goods which are required to be made physically available by the recipient. Section 13(3)(a)

Supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs not covered under this clause.

This clause shall not apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs.

Place of Supply:

• Location where the services are actually performed

• When such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services. [Section 13(3)(b)]

2.6.3 Services supplied to:

• An individual, represented either as the recipient of services or a person acting on behalf of the recipient and

• Such services require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

Place of Supply: Location where the services are actually performed

• Where any service is supplied at more than one location including a location in the taxable territory: Place of supply shall be the location in the taxable territory.

• Where the services are supplied in more than one State or Union territory: The place of supply of such services shall be taken as being in each of the respective States or Union territories:Shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement, in absence of any such agreement, on such other basis as may be prescribed.

2.6.4 Services supplied directly in relation to an immovable property: Section 13(4)

This service shall include the followings:

a. Services supplied in this regard by experts and estate agents

b. Supply of accommodation by a hotel, inn, guest house, club or campsite,

c. Grant of rights to use immovable property,

d. Services for carrying out or co-ordination of construction work, including that of architects or interior decorators.

Place of Supply: Place where the immovable property is located or intended to be located.

• Where any service is supplied at more than one location including a location in the taxable territory: Place of supply shall be the location in the taxable territory.

• Where the services are supplied in more than one State or Union territory: The place of supply of such services shall be taken as being in each of the respective States or Union territories: Shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement, in absence of any such agreement, on such other basis as may be prescribed.

2.6.5 Services supplied by way of admission to, or organisation of a Cultural, artistic, sporting, scientific, educational or entertainment event, or Celebration, conference, fair, exhibition or similar events, services ancillary to above said [Section 13(5)]

Place of Supply: Place where the event is actually held.

• Where any service is supplied at more than one location including a location in the taxable territory: Place of supply shall be the location in the taxable territory.

• Where the services are supplied in more than one State or Union territory: The place of supply of such services shall be taken as being in each of the respective States or Union territories: Shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement, in absence of any such agreement, on such other basis as may be prescribed.

2.6.6 services supplied by a banking company, or a financial institution, or a NBFC, to account holders: Section 13(8)(a)

Place of Supply: The location of the supplier of services.

2.6.7 services supplied by an Intermediary services: Section 13(8)(b)

Place of Supply: The location of the supplier of services.

2.6.8 Services of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month: Section 13(8)(c)

Place of Supply: The location of the supplier of services.

2.6.9 Services of transportation of goods: Section 13(9)

Place of Supply: Place of destination of such goods.

2.6.10 Passenger transportation services: Section 13(10)

Place of Supply: Place where the passenger embarks on the conveyance for a continuous journey.

2.6.11 Supply of services provided on board a conveyance during the course of a passenger transport operation: Section 13(11)

Place of Supply: First scheduled point of departure of that conveyance for the journey

2.6.12 Online information and database access or retrieval services: Section 13(11)

Place of Supply: Location of the recipient of services

Note:

For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:––

(a) the location of address presented by the recipient of services through internet is in the taxable territory;

(b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;

(c) the billing address of the recipient of services is in the taxable territory;

(d) the internet protocol address of the device used by the recipient of services is in the taxable territory;

(e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

(f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;

(g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

2.6.13 Avoidance of double taxation: Section 13(13)

In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.

This article was first published on LinkedIn by Vineet Sahay

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