What is Fixed Establishment under GST?

According to Section 2(7) of IGST Act, “fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for its own needs.

What is the location of the supplier of services?

According to Section 2(15) of IGST Act, “location of the supplier of services” means, –

(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; and

(d) in absence of such places, the location of the usual place of residence of the supplier;

From the above definitions as provided in the GST Act, we can conclude that the location of the supplier can be,

  • The place where he is registered.
  • Any fixed establishment from where he provides the services, which is having the characteristics of permanence and suitable structure in terms of human and technical resources for the supply of services.
  • The place of business or fixed establishment, whichever is most directly concerned with the provision of supply, when the services are provided from more than one location.
  • The place of residence of the supplier in the absence of the above mentioned places.

Based on the above provisions, in the case of advance ruling to the applicant Tokyo Electric Power Company, a foreign company providing services to a registered Indian company, it is ruled that since the foreign company providing the services at the sites, in a fixed establishment having suitable structures in terms of human and technical resources and the characteristics of permanence as provided by the Indian company, it needs to get registered in the state, in which such fixed establishment is located.

As a result, the India Company is not liable to pay tax under reverse charge mechanism as per the Entry No.1 of Notification No. 10/2017- Integrated Tax (Rate) for the services received from the foreign company.  The service is not considered as import of service.

Disclaimer: This article is only for the purpose of understanding the provisions of the Act, The author bears no responsibility on decisions taken by the readers whatsoever.  E&OE.

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