GST – Grandest tax reform made till date in the history of the tax reform of the India in terms of size, coverage and impact. More than one year has passed from the implementation of the GST has passed still various questions faced by the industries are still unsolved or solved very late which arises to various unwanted litigations by the over enthusiastic revenue officials by making various interpretations.
One such questions is faced for the industries in the field of the event management services for the determination of the place of supply of the services. Place of supply concept was inserted in the GST law to meet the basic objective of the law i.e. the goods/services should be taxed at the place where they are consumed and not at the place of origin.
Under GST law, special attention has been given to the reporting & nature of the transactions. GST has three ingredients- CGST, SGST & IGST. All these types of the GST levies are made on the movement of the goods and services.
This movement of goods and services can categorized in two types:
1. Inter- state supply i.e. Between two states
2. Intra-state supply i.e. Within the states
In the GST law, while levying any tax on the supplies of the goods or services, it becomes pertinent to decide whether supplies shall be treated as intra-state supplies or inter supplies. As this will be decisive factor for charging the correct taxes i.e. CGST & SGST or IGST. As the wrong taxes paid in the GST will not reduce the liability of the person but will increase the tax burden and complications.
Now, the principal issue for determination is the ascertainment of the place of supply of event based services provided to a person in which event is organized in more than one states but the billing is made to one state for the consolidated amount for both the events. But both the units in different states are registered under GST law.
For example: Mahesh & co. Pvt ltd registered in Bangalore provides the event management services to the Rhea software Pvt ltd for two locations – Bangalore & Noida and both the locations are registered in the GST. The consolidated billing was made to the Bangalore locations and consideration is also received from the Bangalore unit only. But the event occurred in two different states.
The principal Question arises here is the place of supply of the event management services?
The relevant provisions for determining whether the supply is inter – state and intra state supplies is section 12(7) of the IGST Act which reads as under:
Section- 12 of IGST Act 2017: Place of supply of the services where the location of supplier & recipient is in India:
(7) The place of supply of services provided by way of,—
(a) 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
(b) services ancillary to organisation of any of the events or services referred to in clause (a), or assigning of sponsorship to such events,––
(i) to a registered person, shall be the location of such person;
(ii) to a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient.
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.
As per provisions of the Sub – Section (7) of the section 12 of the IGST Act, place of supply for the services provided by the registered person for the organisation of the cultural, scientific, artistic, entertainment event including supply of service in relation to a conference, fair, exhibition, celebration or similar events and services ancillary for the organisation of the event provided to the registered person, shall be location of the such person and for the unregistered person, place of supply shall be place where the event occurs.
The section seems very clear for the place of supply but the issue arises on while reading the explanation which provides that if the event is held in more than one location, and consolidated amount is charged for the supply, then place of supply shall be taken in 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. The following explanation seems completely covering the aforesaid scenario. Also, the wording written is event not the event not the person other than registered person which creates a illusion that this explanation covers both the registered and unregistered person. Then person shall be required to charged the CGST & SGST for the same state event and IGST on the different state event.
This interpretation finds the support from the basic objective of the GST i.e. consumption of the services i.e. Noida.
But before this interpretation turned into a wide spread litigation for the event based companies, Government curtailed it by issuing Integrated Goods & services Tax Rules 2017 Notification No. 04/2018 – Integrated Tax Dated 31st December 2018 in which rule 5 of the aforesaid specially deals when the event based services provided to the person other than the registered person and in such a case, services needs to be bifurcated between the states but not for the Registered person which means that the following explanation has to read in connection with the unregistered person not with the registered person though event occurred in more than one person. Only ascertaining factor is to whom the billing was made was a registered though event occurred in more than one states, which reads as under:
“5. The supply of services attributable to different States or Union territories, under sub- section (7) of section 12 of the said Act, in the case of-
(a) services provided by way of 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
(b) services ancillary to the organisation of any such events or assigning of sponsorship to such events ,where the services are supplied to a person other than a registered person, the event is held in India in more than one State or Union territory and a consolidated amount is charged for supply of such services, shall be taken as being in each of the respective States or Union territories, and in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined by application of the generally accepted accounting principles.”