Lockdown Time of GST Study
A Detailed Study
NATURE & PLACE OF SUPPLY UNDER GST

Here is a detailed study of Nature and Place of supply of Goods and Services under GST. The study was started by me 10 days before and completed today. I covered lot of issues related to the subject but I know it required still suggestions to improve it. Besides professionals it will be very useful for Students of Professional courses and academic courses of various universities. Please point out Mistakes, shortcoming and suggestions. In coming days I will take up other important matters related to Goods and Service Tax.

Incidentally ICAI has a webcast on the subject today hence you will attend it with better understanding after reading this material. It will certainly give you the basic insight of the subject.

Stay at home, Read and study as much as possible. Keep Distance and be safe and Healthy and follow all the instructions given by the Government.

– Regards
SUDHIR HALAKHANDI

GST images

GST- NATURE OF SUPPLY & PLACE OF SUPPLY  OF GOODS AND SERVICES

WHAT IS THE IMPORTANCE OF NATURE & PLACE OF SUPPLY

The goods and service tax is payable on a transaction on the basis of Intra- state supply of goods and services and Inter-state Supply of Goods and Services. If the supply is intra-state then SGTS and CGST is payable and if the supply is inter-state then IGST is payable. The nature of transaction can only be decided if the Location of supplier and place of supply is determined. In this study we are taking up the Nature of Supply and the Place of supply and in the next study we will take up Location of supplier and other related matters.

All the sections mentioned in this study is from Integrated Goods and Service tax Act, 2017 unless otherwise specifically mentioned.

A. NATURE OF SUPPLY

Let us first have a look an inter-state supply and inter-state supply of Goods and Services.

The arrangement of Sections 7 is as under:-

S.NO. Section Subject of the Section
1.` 7(1) Inter-state supply of Gods
2. 7(2) Import of Goods
3 7(3) Inter-state supply of Services
4. 7(4) Import of Services
5 7(5) Other Exceptional Situations of Inter-State Supply

INTER-STATE SUPPLY OF GOODS
Section 7(1)

As per Section 7 (1) of the IGST Act., supply of goods in the course of Inter-state trade or commerce means any supply where the Location of the supplier and the place of supply are in two difference states or in two different Union Territories or a state and Union Territory. The Section 7(1) is being reproduced herewith:-

7.Inter-State supply: (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

Shall be treated as a supply of goods in the course of inter-State trade or commerce.-Section 7(1)

In the simple words the interstate supply of goods means where Place of supply and the Location of supplier is not in the same state or in the same union territory.

EXAMPLES

X and company from Gujarat (State) have purchased some goods from Y and company of Rajasthan (State). It is Inter-state supply of Goods Since Location of supplier is Rajasthan and Place of Supply is Gujarat and these two are different states.

In this case Location of Supplier and Place of supply are in two different states hence it is Inter-state supply of Goods.

X and company from Puducherry (UT) have purchased some goods from Y and company of Delhi (UT). It is Inter-state supply of Goods Since Location of supplier is in Delhi (UT) and Place of Supply is Puducherry (UT) and both are different union Territories.

In this case Location of Supplier is in Union territory of Delhi and Place of supply is in Puducherry which is also a union Territory and both are separate Union territories hence it is an Inter-state supply of Goods.

X and company from Puducherry (UT) have purchased some goods from Y and company of Gujarat (State). It is Inter-state supply of Goods Since Location of supplier is in Gujarat and Place of Supply is Puducherry.

In this case Location of Supplier is in State of Gujarat and Place of supply is in Puducherry which is a union territory and it is an interstate Supply of Goods.

IMPORT OF GOODS
Section 7(2)

There is one more section and it is section 7(2) and it is related to the Import of Goods. Let us see this definition:-

Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

In case of import of Goods the Importer has to pay tax and the tax in such circumstances in addition to the custom duty paid by him. The tax as per section 7(2) shall be IGST.

INTERS-TATE SUPPLY OF SERVICES
Section 7(3)

As per Section 7(3) of the IGST Act. 2017, supply of service in the course of Inter-state trade or commerce means any supply where Location of the supplier and the place of supply are in different state or two different union territories or a state and a union territory.

Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

Shall be treated as a supply of services in the course of inter-State trade or commerce.-Section 7(3).

It is clear from the above definition that if the Location of supplier of service and Place of Supply of service is in different state/union territories then it will be inter-state supply of service.

Let us try to understand it in the convenient format:-

Location of Supplier Place of Supply of Service Tax Payable
Rajasthan Maharashtra IGST
Delhi Puducherry IGST
Rajasthan Delhi IGST

In the simple words the inter-state supply of service means where Place of supply and the Location of supplier is not in the same state or in the same union territory.

This is the brief description of supply of Inter-state goods and service as per section 7(1) and Section 7(3) which is subject to Section 10 and Section 12 respectively and we will take up Section 10 and Section 12 at later stage in this Study.

IMPORT OF SERVICE
Section 7(4)

Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.-Section 7(4)

In case of import of Service the Importer has to pay tax and the tax in such circumstances shall be IGST. This is clearly a situation where Place of supply of service is in India and the location of supplier is outside India.

OTHER SITUATIONS OF INTER-STATE SUPPPLY
Section 7(5)

Section 7(5) envisages three specific situations where the supply shall be treated as Interstate supply and L

Let us see these three situations:-

S.NO. SITUATION WHERE SUPPLY OF GOODS OR SERVICES OR BOTHE SHALL BE TREATED AS INTER-STATE SUPPPLY
1. When supplier is located in India and the Place of supply is Located outside India.
2. When supply is made to or by a Special Economic Zone Developer or by a special Economic zone unit.
3. A supply which is in taxable territory and which is not an intra-state and not covered in this section.

The Section 7(5) is reproduced here:-

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.-Section 7(5)

This is fiction of Law and like other laws GST Laws are not free from it and it is mentioned in Section 7(5) of the IGST Act and these three types of supply shall be treated as Inter-state supply.

INTRA-STATE SUPPLY

When Location of the supplier and Place of supply is in the same State or in the same Union territory then it shall be Intra-state supply. The section 8 of the IGST Act, 20017 deals with this subject.

The arrangement of Sections 8 is as under:-

S.NO. Section Subject of the Section
1.` 8(1) Intra-state supply of Goods
2. 8(2) Intra-state supply of Service

INTRA-STATE SUPPLY OF GOODS

Section 8(1)

When Location of the supplier and Place of supply is in the same State or in the same Union territory then it shall be Intra-state supply of goods.

As per Section 8(1) of the IGST Act where Location of supplier and Place of Supplier is in the same state or in the same union territory shall be treated as Intra-state supply of goods.

The relevant section is Reproduced below:-

8. Inter-State supply: (1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply:

Provided that the following supply of goods shall not be treated as intra-State supply, namely:––

(i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;

(ii) goods imported into the territory of India till they cross the customs frontiers of India; or

(iii) Supplies made to a tourist referred to in section 15.- Section 8(1)

Further it should be noted here that Section 8(1) has three specific exceptions which are as under:-

S.NO. EXCEPTIONS MENTIONED IN SECTION 8(1)
1. When supply is made to or by a Special Economic Zone developer or by a special Economic zone unit.
2. Goods imported into the territory of India till they cross the customs frontiers of India.
3. supplies made to a tourist referred to in section 15

These three shall be treated as Inter-state supply of Goods as per the exceptions mentioned in Section 8(1) though in some cases they may be Intra-State delivery of Goods.

Here supply to or by SEZ Developer or SEZ Unit shall invariably be interstate Supply of Goods. Import of Goods shall also be Inter-state supply of Goods and third one is very interesting supply made to a tourist refereed in Section 15 shall also be an Interstate supply of Goods.

Let us see section 15 of the IGST Act to understand the importance of this Exception with respect to the Tourists:-

Sec.15. Refund of integrated tax paid on supply of goods to tourist leaving India: The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed.

Explanation.––For the purposes of this section, the term “tourist” means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes.

This Exception is related to Foreign Tourist and any supply made to them shall be Inter-state supply of goods which shall be refunded to them hence it is specifically categories as IGST so that refund can easily be made to them. For this exception and to be eligible for refund a Person:-

Should not normally be a resident of India and
Stays in India for a period less than 6 Months.

Here note the word used is “Person not normally resident in India” hence even Indian citizens like NRI can also take the benefit of this exception if other terms are satisfied and get the refund. Here we are not concerned with the procedure and eligibility of the International tourist to get the refund in this study but in any case the supply shall be treated as Inter-state supply.

INTRA-STATE SUPPLY OF SERVICE

Section 8(2)

As per Section 8(2) of the IGST Act, Where Location of supplier and Place of Supplier is in the same state or in the same union territory shall be treated as Intra-state supply of service.

Subject to the provisions of section 12, supply of services where the location of the supplier and the place of supply of services are in the same State or same Union territory shall be treated as intra-State supply:

Provided that the intra-State supply of services shall not include supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit.- Section 8(2)

The supply made by or to the special Economic zone developer and Special Economic zone unit shall be excluded as exception from section 8(2) and shall be treated as Inter-state supply of service.

Explanations to Section 8:-

Explanation 1.––For the purposes of this Act, where a person has,––

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) An establishment in a State or Union territory and any other establishment registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.

Explanation 2.–A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.

Two Explanations have been added to Section 8 but a plain reading of these 2 Explanations made it clear that these two explanations have nothing to do directly with section 8 and these two are applicable to the whole Act specially the explanation 1.

See the initial wording of the Explanation 1:-

Explanation 1.––For the purposes of this Act, where a person has,––

Let us see the situation as mentioned in these explanations with respect to a “Distinct Person”

S.NO. SITUATION FOR DISTINCT PERSON
1. an establishment in India and any other establishment outside India
2. an establishment in a State or Union territory and any other establishment outside that State or Union territory.
3. an establishment in a State or Union territory and any other establishment registered within that State or Union territory

In these three situations these establishments shall be treated as “Distinct Entities”. See here if a person has two establishments in a single state and having separate Registration numbers then both the establishments though having same Pan shall be categorized as distinct Entities and have to charge tax on their supplies to each other. It is natural for entities established by a single person in two different states or outside India to be categories as distinct entities but in the same state or in the same Union territory they shall be considered on the same footing. Let us try to understand this explanation with the help of these examples:-

X and Company has incorporated in Rajasthan and having its subsidiary in South Africa also. Both these establishment shall be treated as Distinct Entities.
X and Company has incorporated in Rajasthan and having it establishment in Madhya Pradesh also. Both these establishment shall be treated as Distinct Entities.

If X and Company supplies any goods to its establishment in Madhya Pradesh from Rajasthan it has to charge IGST.

X and Company has incorporated in Ajmer Rajasthan and having it establishment in Jaipur also. Both these establishment shall be treated as Distinct Entities.

Please Note here in this particular case , X and Company has the option to take separate GSTN for its Jaipur Establishment and if it is taken then Ajmer entity has to charged Tax but if no separate number is taken then there is no need to charge Tax (SGST/CGST)

SUPPLIES IN TERRITORIAL WATER

Sec.9

9. Supplies in territorial water: Notwithstanding anything contained in this Act,––

(a).where the location of the supplier is in the territorial waters, the location of such supplier; or

(b).where the place of supply is in the territorial waters, the place of supply,

Shall, for the purposes of this Act, be deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located.

Section 9 is related to the supplied in territorial water and it is related to the Location of supplier and the Place of supply in the case Location of supplier and Place of supply is in the territorial waters. Let us see the provision in simpler form to understand it:-

If the Location of the supplier is in the territorial water The location of the supplier shall be the coastal State or Union territory where the nearest point of appropriate base line is situated.
If the Place of supply is in the territorial water The Place of supply shall be the coastal State or Union territory where the nearest point of appropriate base line is situated.

B. PLACE OF SUPPLY

Now here while deciding the Nature of supply whether it is Inter-state or Intra-state there is immense importance of Place of Supply of Goods and Services and Location of Supplier.

Our subject in the Next part of this study is Place of supply and we will take up the Location of Supplier in this Next study.

Let us see how Place of Supply of Goods is determined in the Goods and Service Tax regime to know whether the transaction attracts the SGST/CGST or IGST.

Here it is to be noted that bifurcation of inter-state supply and intra-state supply is based on Location of Supply and Place of Supply of Goods and Services. Here we are doing our study on Place of supply. Here our study is divided in two parts:-

S.NO. PARTICULARS
1. PLACE OF SUPPLY OF GOODS
2. PLACE OF SUPPLY OF SERVICES

PLACE OF SUPPLY OF GOODS

Section 10

Section 10 is applicable for Place of Supply of Goods and it is applicable on supply of Goods other than Supply of Goods imported into or exported From India. Let us first have a Look at section 10(1) before going for the other sub-sections:-

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

The Place of supply of goods imported into and exported from India has been discussed in Section 11 which we will take up after Section 10.

Now Section 10(1) has 5 Parts and the arrangement of this section is as under:-

S.NO. Section Description
1. 10(1)(a) Where Movement of Goods Involved.
2. 10(1)(b) Goods are delivered on the direction of third person.
3. 10(1)(c) Where Movement of Goods not Involved.
4. 10(1)(d) Where Goods are assembled or installed at site.
5. 10(1)(e) Where Goods are supplied on Board a Conveyance.

The Place of supply of Goods in these different above mentioned situations can be understood in details as under:-

WHERE MOVEMENT OF GOODS INVOLVED

Section 10(1)(a)

As per section 10(1)(a) of the IGST Act where the supply involves movement of Goods whether by the supplier or recipient or any other person then place of supply is the Location of Goods where the movement of goods terminates at the time of delivery of goods to the recipient.

Let us see the exact working of the section 10(1) (a):-

Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

Your attention is drawn on the fact that movement of goods is material here and who is doing it is immaterial. The movement of goods can be done by either of the three:-

Supplier of the Goods
Recipient of the Goods
Any other person

Here some of the unique Examples are here to understand this place of supply concept as mentioned in the section 10(1) (a) of the IGST Act.:-

S.NO. EXAMPLE
1. X and Company from Mumbai comes to Ajmer and Purchased some goods from Y and Company of Ajmer and given the GSTIN to the dealer of Ajmer and he himself arranged the transport of Goods on his own. The Place of supply in this case will be Mumbai. The tax shall be IGST,

Here movement of Goods is done by the recipient. Hence it should be noted that Movement of goods should be there and it is immaterial who is doing it or on whose behalf this is done.

2 X from Jaipur (Rajasthan) comes to Ajmer and Purchased some goods from Y and Company of Ajmer and he is Registered person then X and company will charge SGST and CGST. The Place of supply in this case will be Rajasthan.
3. X from Mumbai comes to Ajmer and he Purchased some goods over the counter from Y and Company of Ajmer and he is unregistered person then X and company will charge SGST and CGST. The Place of supply in this case will be Rajasthan.

This case we will discuss later where no movement of goods involved in supply of Goods under section 10(1) (c).

We can Summarise the situations as under:-

Particulars Suppliers Place from where deliver Started Termination of Movement of Delivery Place of Supply of Goods Tax to be charged
Movement of Goods done by the supplier Rajasthan Maharashtra Maharashtra IGST payable in Rajasthan
Movement of Goods done by the supplier Rajasthan Rajasthan Rajasthan SGST /CGST Payable in Rajasthan

GOODS ARE DELIVERED ON THE DIRECTION OF THIRD PERSON

Section 10(1)(b)

Here see one unique situation where Goods delivered on direction of third person then the place of supply in this case will be the Principle Place of business of such person.

Here see one person needs goods but he has no contract with the supplier of goods but has a contract with the third person. Now this third person ordered goods to be supplied to this person who needs goods. The supplier supplies the goods to this person on the direction of third person. Now in this case actual place of delivery does not matter and in this case the Principal place of business of that third person shall be the Place of supply of goods. Later we will try to understand it with the help of an example.

Let us see the relevant section 10(1) (b):-

Where the goods are delivered by the supplier to a recipient or to any other person on the direction of a third person, whether acting as an agent or otherwise , before or during the movement of goods , either by way of transfer of document of title to the goods or otherwise , it shall be deemed that the said person has received the goods and the place of supply of goods shall be the principal place of business of such person.

This will cover Bill to ship to Transactions also. Here note that if on the direction of the recipient the delivery is given to any other person then place of supply shall be the place of recipient of Goods. Let us try to understand this situation in the form of an Example:-

X and Company of New Delhi has placed an order of some goods to Y and Company of Ajmer (Rajasthan) with an instruction to deliver the same to Z and company Udaipur (Raj.).

Here in this case the supplier is Y and Company and Z and company is the person receiving the goods and see both the persons are in the same state i.e. in Rajasthan and X and Company Ajmer (Raj) is the third person on whose direction goods are supplied to Z and Company Udaipur (Raj.).

The delivery of goods is made from Ajmer to Udaipur and both the places are situated in one state i.e. in Rajasthan but the case is covered in the section 10(1) (b) and place of supply shall be Principal Place of Business of the third person i.e. of X and Company and Y and Company will charge IGST though goods are delivered in the Same state i.e. in Rajasthan.

Let us summarise the Transactions covered under Section 10(1) (b) for better understanding:-

Location of Supplier Principal Place of business of Third person who ordered the goods (to whom goods are billed by the supplier) Place of Delivery of Goods to the recipient of goods on the instruction of Third person Location of Supply Tax to be payable
Rajasthan Delhi Rajasthan Delhi IGST in Rajasthan
Rajasthan Rajasthan Delhi Rajasthan SGST /CGST in Rajasthan

WHERE NO MOVEMENT OF GOODS INVOLVED

Section 10(1)(c)

Sometimes supply of goods does not involve the movement of goods and in that case the place of supply of goods shall be the Location of goods at the time of supply. Here is the section 10(1) (c):-

Where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient- Section 10(1)(c)

Over the counter sale is covered under this section where there is no movement of goods is involved at the time of supply of the Goods. Further one more example can be considered under this Section 10(1) (c) and that is related to sale of the Leased financed Asset. Let us see the Example:-

X and Company of Jaipur took a Big Machine on Lease from Y and Company on Lease rent but after some months it is agreed to sale the machine to X by Y and in that case No movement of goods involved and the Place of supply of such machinery shall be the Location of such Goods at the time of Delivery and that is Jaipur since no movement of Goods is involved.

PLACE OF SUPPLY OF GOODS IN CASE OF ISNTALLATION OR ASSEMBLY

Section 10(1)(d)

Here the case is where the goods are installed or assembled at the site then the place of supply of goods shall be such place of Installation or assemble. The exact wording of the section 10(1) (d) is as under:-

Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly- Section 10(1)(d)

Let us see an FAQ on the subject issued by the CBIC:

Q. What is the place of supply in case of assembly or installation of goods at site?

Ans. The place of supply of goods, where the goods are installed or assembled at the site, will be the place of such installation or assembly. (Section 10(1)(d) of IGST Act)

First it should be noted that Section 10(1) (d) is applicable on supply of goods only and it is not applicable on works contract service. The supply of goods may involve some service contents also but in that case the principal supply should be the supply of goods.

Let us try to understand the concept with the help of an Example:-

Description Location of supplier Registered office of the recipient Assembly site Place of supply Tax applicable
Machinery Rajasthan Maharashtra Rajasthan Rajasthan SGST+CGST
Machinery Rajasthan Maharashtra Maharashtra Maharashtra IGST
Machinery Rajasthan Maharashtra Karnataka Karnataka IGST

PLACE OF SUPPLY ON BORAD A CONVEYANCE

Section 10(1)(e)

Where goods are supplied on board a conveyance then the Place of supply of shall be the location at which such goods are taken on board. Here conveyance includes aircraft, train, and motor vehicle also. Sometimes goods are loaded on the conveyance and same was supplied on board of such conveyance. Now at the time of actual supply as such it is not possible always to track where the Place of supply was hence in such cases a provision is made itself in the Act and in case of such supply which is made on the board of a conveyance then place of supply of goods shall be Location at which such goods are taken board.

See Section 10(1) (e):-

Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

Here we are trying to understand the same with the help of an Example:-

X and Company Ajmer supplied some Goods to Y and Company of Delhi and loaded these goods on the Rajdhani Express at Ajmer Railway Station. The goods Loaded were 100 units. Y and Company supplied 80 units out of these goods to the Passengers on the board of Rajdhani Express from Ajmer to Delhi on different stations. Now the Place of supply for the transaction between Y and Company and the passengers i.e. 80 units shall be Ajmer i.e. the Location at which goods are loaded on the train.

Here section 10(1) (e) only deals about the supply on the board a conveyance only and in the above illustration one more supply is involved and that is between X and Company and Y and Company and in that case the place of supply shall be determined as per the provisions of section 10(1) (a) and in that case the Place of supply shall be Delhi where the delivery terminates.

Here we can simplify the illustration given above in the following format:-

Units Description Place of Supply
80 Supplied between Ajmer to Delhi Ajmer
20 Unsold Wait for actual supply of goods

WHEN PLACE OF SUPPLY CAN NOT BE DETERMINED

Section 10(2)

Where the place of supply cannot be determined by any of the way mentioned above then it shall be determined in the manner prescribed. The Section 10(2) is reproduced herewith:-

Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.

Now there is section 11 which is related to the exception mentioned in Section 10(1) i.e. Goods imported into and Exported from India. Let us have a look at this Section 11.

GOODS IMPORTED INTO OR EXPORTED FROM INDIA

Section 11

The place of supply in case of Import of goods is the location of Importer and in case of Export of goods from India shall be the location outside India. This provision is given in section 11 and the same is being reproduced below:-

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 11 is very clear in itself but in case of Import of Goods in India the Location of importer is very important to know the place of supply of Goods. Here one Example given from the FAQs issued by the CBIC:-

Q 11. What is the place of supply of goods imported into India?

Ans. The place of supply of goods imported into India shall be the location of the importer.

Illustration: An importer from Jaipur, Rajasthan imports goods from China through Mumbai Air Cargo and declared the GSTIN of Rajasthan. The place of supply of goods shall be Rajasthan. Thus, the state tax component of the integrated tax would accrue to Rajasthan.

2.PLACE OF SUPPPLY OF SERVICE

We have seen section 10 which is exclusively for Place of supply of Goods and now we are taking up Place of supply of services. Section 12 is there for it and it is little bit complex than place of supply of Goods. Let us start it and try to understand its complexities:-

The place of supply of service is somewhat complicated issue than place of supply of Goods because there is no Movement is involved in supply of service. Section 12 of the IGST Act is there to tackle this issue. Section 12 has bifurcated the services in two parts First for Normal and unspecified Services and second one is specified services.

Section 12(2) has the provisions for Normal and unspecified Services and section 12(3) to Section 12(14) has the provisions for services specified in these sections. Here for simplification of subject matter we have given the nomenclature to services which are not specified in 12(3) to 12(14) as “General or unspecified services”.

First see section 12(1) and which is very clear about applicability of the Section 12. Let us first see the Section 12(1):-

The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.Section 12(1)

PLACE OF SUPPLY IN CASE OF GENERAL SERVICES

First part this provision is for General or unspecified services with respect to Place of supply of Services and it is mentioned in Section 12(2) and in Second part some specific services mentioned in Section 12(3) to Section 12(14) and there place of supply is mentioned in these relevant sub-sections.

Let us first take the Normal services and here General or unspecified services mean which are not specified in Section in Section 12(3) to 12(14). There is a general provision to know the place of Supply of service and this is mentioned in Section 12(2). This provision are summarised as under:-

S.NO. RECIPIENT OF SERVICE PLACE OF SUPPLY OF SERVICE
1. Registered Person i.e. B to B The Location of Such Person.
2. Unregistered Person B to C If the Location of Recipient is available on the records then Location of Recipient.

If address of the Recipient is not available on records then the Location of supplier.

Let us have a Look at Section 12(2) as it is appeared in IGST Act, 2017:-

Sec. 12(2)- The place of supply of services, except the services specified in sub-sections (3) to (14),–

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,––

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

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

PALCE OF SUPPLY OF SPECIFIED SERVICES

Let us have a Look at the second part services for which Place of supply is mentioned in that section i.e. Section 12(3) to 12(14). Let us first take up these services and their place of supply:-

Section Description of Service Place of Supply of Service
1. SERVICES IN RELATION TO A IMMOVABLE PROPERTY
12(3)(a) Service Provided in relation to an Immovable Property by Anybody including Architect, Interior Decorator, Surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or carrying out or coordination of construction work. Location of Such immovable property.

Here note that the Location of supplier and the recipient is irrelevant and Location of the immovable property shall be the deciding factor.

The service of Architect, Interior Decorator, Surveyors, engineers and other exerts etc. Are included in this provision and it should be noted that the list is not exhaustive.

2. LODGING ACCOMODATION IN A HOTEL, INN ETC.
12(3)(b) Lodging Accommodation in A hotel, inn, guest house, home stay, club or campsite by whatever named called and including a House boat or any other vessel. Location of Such Hotel, inn, gust house etc. Here Location means where it is located or intended to be located.
3. USE OF IMMOVABLE PROPERTY FOR ORGNISING A MAARIEGE , FUNCTION ETC.
12(3)(c) By way of organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including service provided in relation to such service. Location of such immovable property.
4. ANY SERVICE ANCILLARY TO THE SERVICE IN 1 TO 3 ABOVE
12(3)(d) Any service ancillary to the services referred to in 12(3)(a) to 12(3)(c) Location of such immovable property, boat or vessel. The Location means it is Located to intended to be Located.
It should be noted here that if the Location of immovable property or boat or vessel is Located or intended to be located outside India, the place of supply shall be the Location of Recipient of Service.
One Explanation is also added to section 12(3) which is related to Proportion of supply of Service where the immovable property or boat or vessel is located in more than one State or Union territory. Let us see the Explanation:-

Explanation.––Where the immovable property or boat or vessel is 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 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.

Please refer – Rule 4 of Integrated goods and Service Tax Rules, 2017

5. RESTAURANT , CATERING , FITNESS SERVICE ETC.
12(4) Supply of Restaurant and catering service, personal grooming, fitness, beauty treatment, health service including cosmetic and Plastic surgery. Location where such services are performed.
6. TRAINING AND PERFORMMANCE APPRISAL SERVICE
12(5) Service in relation to training and performance appraisal. (i). Where service receiver is a registered person than the Location of such person.

(ii).Where service receiver is an unregistered person then the place where service is actually performed.

7. ADMISSION TO CULTURAL , ARTISTIC , SPORTING EVENT ETC.
12(6) Service provided by way of admission to a cultural, artistic, sporting, scientific, educational , entertainment event or amusement park or any other place and services ancillary thereto. The place where such event is actually held or such place is located.
8. ORGANISATION OF A CULTURAL , ARTISTIC, SPORTING EVENT ETC.
12(7)(a) and (b) Organisation of a cultural , artistic, sporting , scientific, educational or entertainment event including supply of services in relation to a conference , fair, exhibition, celebration or similar events

Or

Services ancillary to organization of any of the events mentioned above or assigning of sponsorship to such events.

(i). Where service receiver is a Registered person than the Location of such person.

(ii).Where service receiver is an unregistered person then the place where event is actually held and if the event is held outside India, the place of supply shall be the Location of the Recipient.

One Explanation is also added this section 12(7) which is related to Proportion of supply of Service where the event is held in more than one State or Union territory. Let us see the Explanation:-

Explanation.––Where the event is 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 of such services shall be taken as being in each of the respective States or Union territories 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.

Please refer – Rule 5 of Integrated goods and Service Tax Rules, 2017

9. TRANSPORTATION OF GOODS
12(8) Service by way of Transportation of Goods including by mail or courier. If service is provided to a Registered person then the Location of such person.

If service is provided to an unregistered person then the place where the goods are handed over for their transportation.

Further it should be noted here that if Transportation of Goods is to a place outside India, the Place of supply shall be the destination of such Goods.

10. PASSENGER TRANSPORTATION SERVICE
12(9) Passenger Transportation Service If service is provided to a registered person then the Location of such person.

If service is provided to an unregistered person then the place where the passenger embark on the conveyance for a continuous journey.

Further if right of passage is given for future use and the point of embarkation is not known at the time of issue of right of passage then the place of supply will be determined as per provisions of section 12(2) which we have already discussed in earlier part of this study.

An Explanation is added to Section 12 (9) with respect to return Journey. Let us have a Look at it:-

Explanation.––For the purposes of this sub-section, the return journey shall be treated as a separate journey, even if the right to passage for onward and return journey is issued at the same time.

11. SUPPLY OF SERVICE ON BOARD A CONVEYANCE
12(10) Supply of service on board a conveyance including a vessel, an aircraft, a train or a motor vehicle. First schedule point of departure of such conveyance for the journey.

 

12. SECTION 12(11):- SUPPLY OF TELECOMMUNICATION SERVICES INCLUDING DATA TRANSFER, BROADCASTING, CABLE AND DIRECT TO HOME TELEVISION SERVICE.
12(11)(a) Services by way of fixed telecommunication line, leased circuits, and internet leased circuit, cable or dish antenna. Location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services.
12(11)(b) In case of mobile connection for telecommunication and internet services provided on post-paid basis. Location of billing address of the recipient of services on the record of the supplier of services.
12(11)(c) Mobile connection for telecommunication, internet service and direct to home television services are provided on pre-payment basis through a voucher or any other means
12(11)(c)(i) When this service is provided through a selling agent or a re-seller or a distributor of subscriber identity module card or re-charge voucher. Address of the selling agent or re-seller or distributor as per the record of the supplier at the time of supply.
12(11)(c)(ii) By any person to the final subscriber. Location where such prepayment is received or such vouchers are sold.
12(11)(d) In other cases. The address of the recipient as per the records of the supplier of services and where such address is not available, the place of supply shall be location of the supplier of services
Provided that where the address of the recipient as per the records of the supplier of services is not available, the place of supply shall be location of the supplier of services:
Provided further that if such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the recipient of services on the record of the supplier of services shall be the place of supply of such services.
Explanation.––Where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such circuit, the place of supply of such services shall be taken as being in each of the respective States or Union territories 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.

Please refer Rule 6 of the Integrated Goods and Service Tax Rules 2017.

13. BANKING AND OTHER FINANCIAL SERVICES
12(12) Banking and other financial services, including stock broking services to any person. Location of the recipient of services on the records of the supplier of services.

If the location of recipient of services is not on the records of the supplier, the place of supply shall be the location of the supplier of services.

14. INSURANCE SERVICES
12(13) Insurance Service To a registered person, be the location of such person;

To a person other than a registered person, is the location of the recipient of services on the records of the supplier of services.

12(14) Advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for the States or Union territories identified in the contract or agreement. The Place of Supply shall be taken as being in 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 attributable to services provided by way of dissemination in the respective States or Union territories as may be 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.
Please refer Rule 3 of the Integrated Goods and Service Tax Rules 2017.

PLACE OF SUPPLY OF SERVICE WHERE LOCATION OF SUPPLIER OR LOCATION OF RECIPIENT IS OUTSIDE INDIA

SECTION 13

From the heading of Section 13 it is clear that for which situation the above section is created and this situation is if Location of supplier of the service or the Location of recipient of service is outside India. We have already read that the Place of supply with respect to the Services is a very complicated matter so section 13 is not an exception.

It has also two parts and first one was for General and unspecified services and second one is for specified services. For General and unspecified services the provisions are given in the Section 13(2). For specified services the provisions are given in Section 13(3) to Section 13(13).

PLACE OF SUPPLY OF SERVICE IN CASE OF UNSPECIFIED SERVICES

As per sections 13(2) the place of supply shall be the Location of the recipient of the service except services mentioned in section 13(3) to 13(13). Further if the location of recipient of service is not available in the ordinary course of business then the place of supply of service shall be the location of the supplier of service.

Let us have a look at section 13(2):-

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.

PLACE OF SUPPLY OF SERVICE IN CASE OF SPECIFIED SERVICES

The place of supply of service with respect to certain service is mentioned in section 13(3) to Section 13(13) and we are taking up the same one by one as under:-

SECTION PROVISION AS PER LAW
1. THE PLACE OF SUPPLY OF THE FOLLOWING SERVICES SHALL BE THE LOCATION WHERE THE SERVICES ARE ACTUALLY PERFORMED- Section 13(3)(a) & 13(3)(b)
13(3)(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 or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process.

13(3)(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.
2. SERVICE DIRECTLY IN RALATION TO IMMOVABLE PROPERTY
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.
3. ADMISSION TO ORGANIZATION OF A CULTURAL, ARTISTIC, SPORTING…. EVENT
13(5) The place of supply of services supplied by way of admission to, or organization 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.
4. WHEN ABOVE SERVICES AS MENTIONED IN 13(3) TO 13(5) ARE PROVIDED AT MORE THAN ONE LOCATION
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.
5. WHEN ABOVE SERVICES AS MENTIONED IN 13(3) TO 13(5) ARE SUPPLIED IN MORE THAN ONE STATE OR UNION TERRITORY
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.

Please refer Rule 8 and Rule 9 of the Integrated Goods and Service Tax Rules, 2017 Read with Rule 4 & 5 of the Integrated Goods and Service Tax Rules 2017.

6. SERVICES BY BANKING COMPANIES , FINANCIAL INSTITUTIONS ETC.
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; (2 of 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; (2 of 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.

7. TRANSPORTATION OF GOODS
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.
8. PASSENGER TRANSPORTATION SERVICE
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.
9. SERVICES PROVIDED ON BOARD A CONVEYANCE
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.
10. ONLINE INFORMATION AND DATABASE ACCESS OR RETRIEVAL SERVICES
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.

11. PREVENTION DOUBLE TAXATION OR NON-TAXATION OF THE SUPPLY OF A SERVICE
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.

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5 Comments

  1. Ramachandran says:

    There are a lot of mistakes I have identified. This may lead to different understanding. For example please see below
    ——
    Here in this case the supplier is Y and Company and Z and company is the person receiving the goods and see both the persons are in the same state i.e. in Rajasthan and X and Company Ajmer (Raj) is the third person on whose direction goods are supplied to Z and Company Udaipur (Raj.).
    —————————–
    Here X and Company is in Delhi and not in Rajasthan.

    1. CA SUDHIR HALAKHANDI says:

      Thanks for pointin out the Mistake and it is being corrected in next copy . Please read New Delhi instead of Ajmer (Rajasthan) .
      The typing error is highly regretted.

  2. Ramachandran says:

    Hello, I am a GSTP. Your article is good. Just observed a couple of corrections.
    1. Please check spelling of Goods (typo error)
    2. Although Delhi and Pondicherry are UT, still they are considered as State for the purpose of GST.
    If i come across any other points during the course of my study of this blog, shall let you know.
    Thanks,

    1. CASUDHIR HALAKHANDI says:

      Thanks for pointing out the errors. Noted and being corrected in Next and irpoved edition.
      1.The spelling of Goods have been corrected.
      2. The Mistake of indintification of UTs have been corrected in next edition in light of proviions of section 2(103) and 2(114).
      Thanks and Regards.

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