The most critical part in GST is determining the location of place of supply of goods and services outside India. Section 11 and section 13 of the IGST Act, 2017, contains the provisions of determining the place of supply outside India.
As per Section 7(5) of the IGST Act, 2017
Supply of goods or services or both,––
(a) when the supplier is located in India and the place of supply is outside India;
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.
Hence, as per the aforementioned provision, import and export of goods and services will be regarded as inter-state supply and IGST will be charged.
Also read-
Place of supply of services in India- Part 2
Place of Supply of goods in India- Part 1
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.
Section 13 – Determination of place of supply of services outside India.
Section 13 (2) – The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:
Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.
General Rule: The place of supply of services is the location of recipient of services, hence, not chargeable under GST. However, if the location of services receiver is not known then place of supply will be the location of service provider.
Section 13 (3) – The place of supply of the following services shall be the location where the services are actually performed, namely:—
(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:
Provided that 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:
Provided further that nothing contained in this clause shall 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;
(b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.
Example –
a. XYZ Ltd of New Delhi imports machinery from Germany to be installed in New Delhi. The service engineer also arrives for installation of machinery as per the contract. Since, the machinery is getting installed at New Delhi, the place of supply will be New Delhi.
b. SEO Ltd a software company in Bengaluru, provides services to the software company in US. The place of supply in this case will be US.
c. ABC Ltd exported goods to GMBH Inc of Germany. The goods were imported into India for free repairs for one year as per the contract. The goods were exported after the repairs. In this case place of supply is the location of recipient, Germany.
d. Mr. A of Italy, a consultant, working for B Ltd of Delhi, comes to India and stays in a hotel in Delhi. The place of supply will be Delhi.
Section 13 (4) – The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located.
Example –
a. Mr D an architect based in Amravati, Andhra Pradesh, provides services to a construction project in New York. The place of supply will be New York and IGST is chargeable.
b. Mr. C a carpenter enters into a contract with Mr Z of Italy for manufacturing of furniture, in the construction projects at Mumbai and Berlin. The place of supply will be Mumbai. Since, immovable properties are located in more than one location including a location in taxable territory, the place of supply will be the location in taxable territory, Mumbai.
Section 13 (5) – The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held
Example –
a. Russian circus group organized circus in Navi Mumbai, the place of supply will be Navi Mumbai
b. An artist from New Delhi is organising an art exhibition in Dubai and Delhi. The place of supply will be Delhi. Since, immovable properties are located in more than one location including a location in taxable territory, the place of supply will be the location in taxable territory, Mumbai.
Section 13 (6) – Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory.
Interpretation-
If services in relation to repairs of goods, immovable property and organization of art fairs and exhibition are supplied at more than one location, and one of such locations is in the taxable territory, the place of supply will be such taxable territory. Accordingly, IGST is chargeable.
Section 13 (7) – Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) 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 and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.
Interpretation –
If services in relation to repairs of goods, immovable property and organization of art fairs and exhibition are supplied at more than one location in the taxable territory, the place of supply will be each such taxable territory. The proportion of value of services will be determined as per the terms of contract. If such agreement is not available it will determined according to the GST valuation rules.
Section 13 (8) – The place of supply of the following services shall be the location of the supplier of services, namely:––
(a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;
(b) intermediary services;
(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.
Explanation.––For the purposes of this sub-section, the expression,––
(a) “account” means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account;
(b) “banking company” shall have the same meaning as assigned to it under clause (a) of section 45A of the Reserve Bank of India Act, 1934;
(c) ‘‘financial institution” shall have the same meaning as assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934;
(d) “non-banking financial company” means,––
(i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or
(iii) such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.
Example-
a. State Bank of India, Mumbai providing services to the customers of New York for operating the NRE and NRO account and charging annual account maintenance charges, the place of supply will be Mumbai.
b. A travel agent in Mumbai books a tour of India for a customer in Dubai, the place of supply will be Mumbai.
c. Mr. X an unregistered person hires a yacht from a company in London, for 15 days, the place of supply will be London.
Section 13 (9) – The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.
Example – A shipping transport company in Chennai, transports goods to London to an event management company. The place of supply is location of destination of goods.
Section 13 (10) – The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey
Example – An airline company has its flight from New York to Delhi. Where a passenger embarks on the journey at New York, the place of supply will be New York.
Section 13 (11) – The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.
Example – The place of supply of services, on an aircraft from New York to New Delhi, will be New York, hence, no GST is chargeable.
Section 13 (12) – The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.
Explanation.––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.
Example –
The example of online information and database access or retrieval (OIDAR) services is providing e-books, digital data storage, online gaming, online supplies of digital content etc. The place of supply of these services will be the location of service recipient is in the taxable territory.
Author Bio
Sir, Please give your advice on the below case:
Mr.A is a registered person under GST in India and he is an IT service provider. He went to London and he is providing service over there to his London clients.
1) What will be the “place of supply”? Does it cover under sec-13(2) general rule? If so then the POS = “Location of recipient” if I am not wrong.
2) What will be the “Location of supplier” of the service?
3) And accordingly, Does it cover under “Export of Service”? Does this transaction covered under GST?