THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017
This Act deals with Levy and collection of tax, exemption from tax, nature of supply whether inter or intra state, place of supply of goods or services whether within or outside India, Special provision for online information services, zero rated supply, Tax refunds on exports and Tax refunds to tourists.
This can be understood from the following table:
|Contents||CGST Act||IGST Act||UTGST Act|
|No of pages||103||17||14|
|No of sections||174||25||26|
|No of schedules||3||–||–|
Now let us understand
Levy and collection of IGST.
It is applicable on the value and at the rate as determined under section 15 of CGST Act on
⇒ all inter-state supplies of Goods or services or both (herein after referred as GSB) except on the supply of alcoholic liquor for human consumption, supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
⇒ Certain categories supply of GSB as notified under Reverse charge mechanism (RCM)
⇒ Recipient of GSB from an unregistered person under RCM
⇒ Electronic commerce operators as notified
However, this Act fixes the ceiling of 40 % rate of tax.
Exemption from Tax
The Government, on the recommendation of the council, by notification either wholly or partly exempt from the levy of tax
a. on certain GSB.
b. on certain GSB under certain special circumstances (Cyclone, Flood)
Any non- compliance, like collection of tax, of this provision is a violation under the Act.
Nature of Supply
Following supplies are considered
⇒ as inter-state supplies of Goods where the supplier and place of supply are in-
(a) two different States; (Tamil Nadu and Karnataka)
(A Ltd supplier of goods in Chennai. These goods are delivered in Bangalore)
(b) two different Union territories; (Puducherry and Delhi)
(A Ltd supplier of goods in Karaikal. These goods are delivered in East Delhi)
(c) a State and a Union territory, (Tamil Nadu and Delhi)
A Ltd supplier of goods in Chennai. These goods are delivered in East Delhi)
⇒ as imports of Goods (Srilanka to India)
till supply cross the customs frontiers of India
⇒ as inter-state supplies of services where the location of supplier and place of supply are in-
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory
⇒ 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
⇒ as inter-state supplies of GSB
a. when supplier is in India and the place of supply is outside India (Australia)
b. to or by a SEZ developer or a SEZ unit; or
c. in the taxable territory, not being an intra state supply and not covered elsewhere in this section (Residuary)
Nature of Supply- Intra-State
Where the location of supplier and place of supply are in the same state, but the exception is
- Supply to or by a SEZ developer or SEZ unit
- Goods imported into India till they cross the customs frontiers of India
- Supplies made to a tourist
where the location of the supplier and the place of supply of services are in the same State or same Union territory but the exception is
- Supply to or by a SEZ developer or SEZ unit
For the purpose of this Act, the same person is considered as distinct person where
o His one establishment is in India and another establishment outside India
o His one establishment is in a state or union territory and other establishment outside that state or union territory
o His one establishment is in a state or union territory and other establishment being a vertical registered within that state or union territory
o A branch, agency or a representational office of a person in business shall be treated as an establishment in that territory.
Supplies in Territorial Water
Where the location of the supplier or the place of supply is in the territorial water, the supply shall be deemed to be in the coastal state or union territory where the nearest point of the appropriate baseline is located.
Place of supply of GSB whether within or outside India
Imports and Exports – Goods
In case of imports, the location of recipient is in India
In case of Exports, the location of recipient is outside India
Other than imports and Exports – Goods
|Where Supply||Place of supply will be where|
|involves movement of goods||goods terminate for delivery to the recipient|
|Delivery of goods is directed by a third person or transfer of documents of title||Principal place of such third person|
|does not involve movements||the location of such goods at the time of delivery to recipient.|
|of goods are assembled or installed in nature||The place of installation or assembly|
|of goods on board, a vessel, aircraft, train, motor vehicle||the location at which such goods are taken on board|
|Where place supply cannot be determined then it shall be determined as prescribed|
Sec 12 (1) Location of supplier and recipient are in India -Various Services
To ascertain the place of supply, certain specific services are listed from serial no 3 to 14. Sl No 2 refers the residual entry covering services not referred against Sl.no 3 to 14.
We have listed all the 14 services. But the examples are given for some selected services to understand what is the place of supply:
|Where Supply (Name of services)||Place of supply will be|
|2||of services not covered by sl no 3 to 14 then if it is made to registered person||Location of such person|
|if it is made to other than Regd.person||location of recipient as per records and in other cases the location of the supplier|
|3||is provided by |
a) architects, surveyors, engineers, real estate agents, other such similar services, real estate in relation to immovable property
|the location of such immovable property or boat or vessel. If such property is located outside India then the location of the recipient. If the supply is covered by more than a state or UT, then in proportion to the value as determined by agreement or by actual data.|
|b) Accommodation in a hotel, guest house, club house etc. including the house boat or any other vessel|
|c) Accommodation in any immovable property for a marriage or any other social or business event|
|d) Ancillary services to the above services|
|4||Restaurant, catering, fitness, beauty treatment and similar such services||the location where such service is performed|
|5||In relation to training and performance appraisal to||a) Regd person then location of such person. |
B) Other than regd. person then the location where it is performed
|6||Admission to a cultural, sporting, entertainment, educational or such other event||Location where such event is held|
|7||Organization of the various events and its ancillary services as referred in sl no 6||a) Regd. person then location of such person. |
b) Other than regd. person then the location where it is held
c) If held outside India then the location of the recipient
d) If the supply is covered by more than a state or UT, then in proportion to the value as determined by agreement or by actual data.
|8||Transportation of Goods by mail or courier||a) Regd person then location of such person |
b) Other than regd. person, then the location where goods are handed over for transportation
|Transportation of passengers||a) Regd person then location of such person |
b) Other than regd. person, then the place where he/she embarks on the conveyance for a continuous journey
c) Return journey is a separate journey even if it is covered in the original booking
|10||On board a conveyance, vessel, aircraft, train or motor vehicle||Location of the first schedule of departure|
|11||Telecommunication services, data transfer, broadcasting, cable, DTH television services||a) Location where fixed telecommunication line, internet/ leased circuits, cable or dish antenna are installed |
b)Post-paid mobile services/internet services the billing address of recipient as per records of service provider
c)In case of pre-paid vouchers for mobile/internet/DTH services through a selling agent or reseller or distributor then the address of them as per records of supplier.
In case of C , if by any person to the final subscriber , the location where such prepayment is received
d)In other cases the address of recipient as per supplier’s records and where address is not available then the location of the supplier.
In case of prepaid recharge is done by internet or electronic mode ,then the address of the recipient as per suppliers record .
|12||Banking, other financial and stock broking services||a) the location of recipient address as per supplier’s records |
b) if address not available then the location of the supplier.
|13||Insurance services||a) in case of a regd. person, location of such person |
b) Other than regd. person, location of the recipient address as per supplier’s records.
|14||Advertisement services to Governments /local bodies||Proportionate to the amount attributable as per terms of contract/agreement|
|Against sl no 3,7,11 and 14 the Government foresees circumstances where place of supply could still not be defined, the term “as may be prescribed” is inserted under explanation clause|
– Service related to immovable property- Sr. No.3
1) An Architect is in Mumbai. He does design services to a promoter for building flats on a land in Delhi.
The place of supply is Delhi as the immovable property is in Delhi.
2) An Architect is in Mumbai. He does design services to a promoter for building flats on a land in New York, USA.
If the flat promoter is in New York – It is export of service
If the flat promoter is in India – It is a service within India.
Training services – Sr No.5
1)A Ltd. Chennai giving training to B Ltd, Mumbai both are registered in GST.
The place of supply is Mumbai as B ltd, recipient, a registered person in Mumbai
2)A Ltd. Chennai giving training to B Ltd, Mumbai who is not registered in GST. The training is given in Chennai.
The place of supply is Chennai as B ltd is not registered and place of training is in Chennai
(Residual)- Sr No.2 Audit service, service not covered by Sr no 3 to 14
“A” Charted Accountancy firm, providing audit service to “B Ltd” Delhi both are registered in Delhi under GST.
Place of supply is Delhi.
In the same example if “B Ltd” Delhi is not registered then
Place of supply is Delhi
as in the record of A, B ltd address is in Delhi
Transportation service of Goods – Sr. No 8
1)A ltd, Chennai transports goods to a registered person B Ltd, Bangalore.
Place of supply is Bangalore, the location of the recipient, a regd. person
2)A ltd, Chennai hands over goods at Chennai to B Ltd, Bangalore not a registered person
Place of supply is Chennai as Chennai is the location where goods are handed over for their transportation.
3) In the same example 2, if A ltd hands over goods to B Ltd, Bangalore at Bangalore for their transportation, then
Place of supply will be Bangalore as Bangalore is the location where goods are handed over for their transportation.
Place of supply of services – Location of supplier or location of recipient is outside India
1) To determine the place of supply, identify where the supplier or recipient is located
2) It shall always be the location of recipient of service. If location of recipient is not available in the ordinary course of business then the location of supplier. The exception is where the service is actually performed. Refer sr.no 3
3) In the following cases, the place of supply is where the service is performed:
(a) On goods which are physically made available to provide the service by supplier by himself or by electronic mode. The exception, being, on goods temporarily imported for exports after repair
(b) Where physical presence of the recipient or a person acting on his behalf is required to perform the service
4) Services, construction activity like architect, interior decoration etc., in direct relation to immovable property, grant of right to use immovable property, accommodation by a hotel, club, guest house etc.- The location of, or intend to be located, of immovable property is the place of supply
5) Admission, organization of cultural, sporting, entertainment and similar such services. The place where the event is actually held.
6) If services referred against sl 3 to 5 are supplied in more than one location then the place of supply is every such location which may include a taxable territory also.
7) The value of supply referred against sl.no 6 will be in proportion to the actual value or as per terms of agreement
8) The place of supply will be the location of supplier in cases where
(a) Services by a banking / non- banking co, Financial Institutions to account holders
(b) Intermediary services
(c) Hiring of means of transport excluding aircraft and vessels up to one month period
9) The place of destination of Goods is the place of supply, other than courier / mail, where transportation of goods service involved.
10) In case of passenger transportation, place where he/she embarks on conveyance for a continuous journey is the place of supply
11) On board service consumed by passengers, the first scheduled point of departure for the journey is the place of supply.
12) In case of online information and data retrieval services, the location of service recipient is the place of supply. He is deemed to be in taxable territory if any two of the following non-contradictory conditions are satisfied:
(a) The location of the address of the recipient in the internet is in taxable territory
(b) The usage of debit/credit/smart card used in taxable territory while settling the payment dues
(c) Billing address of recipient is in taxable territory
(d) Internet protocol address used by the device of the recipient is in taxable territory
(e) The bank account used in the taxable territory in settling dues
(f) The country code in the ID card used by the subscriber in the taxable territory
(g) The location of fixed line used by the service receiver in taxable territory
13) The Government will notify any service and its place of supply to prevent double taxation or non-taxation of supply of service.
1) Consultation on productivity service provided by AB co of UK to BC co of India. – Ref Sr. No 2
The service is consultation service
The supplier of service is AB Co of UK
The receiver of Service is BC co of India
The place of supply is India
2) AB co of UK had sent his representative to BC co of India for performing certain specialized service, on the goods of BC co.- Ref Sl no 3 (b)
The service is repair / enhancement service
The supplier of service is AB Co of UK
The receiver of Service is BC co of India
The place of supply is INDIA
3) BC co of India supplied the interior decoration drawings to AB co of UK for his office building – Ref Sr no 4
The service is interior decoration service on immovable property at UK
The supplier of service is BC Co of India
The receiver of Service is AB Co of UK
The place of supply is UK
4) A passenger buys a ticket from Chennai to New York viz, London.
The service is passenger transportation
Journey originates at Chennai, the embarking point for continuous journey
Place of supply – Chennai
5) In the same example of 4, for on board service consumed by passenger
Place of supply will be Chennai as it is the first scheduled point of departure, though substantial portion of on board service is consumed in other than Indian space.
Payment of integrated tax by a supplier of online information and database access or retrieval services
The supplier may be in a non – taxable territory and recipient of such service may be a non-taxable person, (Government or individual consumer of such service not registered) still the supplier is liable for payment of IGST.
The supplier, in non-taxable territory, by himself registered under simplified registration scheme in taxable territory or he can be represented by any other person, an intermediary, in a taxable territory who can register and act on behalf of supplier.
If supplier in non-taxable territory is not registered and not represented through an intermediary, he may appoint a person in the taxable territory for payment of IGST who is liable for payment of IGST.
Refund of IGST to Tourist
The Indian Government do not want to burden the tourist from other countries for their infrastructure and other development activities. Hence the tax paid by them during their stay in India will be refunded to them when they return as prescribed.
ZERO Rated Supply
As per section 17(5) of CGST Act, 2017, the input tax credit is allowed for all the exports and supplies to SEZ developer and SEZ units.
Such registered person making zero rated supply may,
either export the goods under bond or letter of undertaking without tax payment and claim the refund of unutilized input tax credit
export the goods by paying applicable IGST and claim refund of the same as prescribed
Apportionment of IGST and settlement of the same amongst center, state and union territories
The IGST is CGST + SGST or UTGST. IGST input credit can be used to set off both the CGST and SGST/UTGST liability. The centralized automation system apportions the respective portion of GST to the respective State/Union Territory/ Centre after net settlement of CGST / SGST or UTGST received as a destination based tax and the output tax paid on a time bound basis. This is fully automated and system related much to do with the revenue and not to do with the tax payers.
The centralized system also apportions to the respective government the unclaimed/unutilized input tax credit lying beyond the time limit, the disputed amount of tax, interest and penalty lying unsettled and resettle the same once the dispute is settled. This is again based on the auto populated entries in the electronic registers of the tax payers
Tax collected under the wrong heads, IGST instead of CGST and SGST/UTGST and vice versa
If intra state supply is wrongly treated as Inter-state supply and IGST is paid, then refund claim is to be made for wrong IGST payment after payment of CGST and SGST with interest.
In vice versa, i.e. where CGST and SGST is paid, treating it as intra state instead of inter-state transaction, then no interest is payable on IGST payment.
It can be observed from the changes made in the draft GST Law and the subsequent drafts followed till it becomes IGST Act enough efforts were put in by all the stake holders to make it less dispute prone.
In the IGST Act itself under section 12, place of supply of service within India, in respect of four services, the explanation is inserted with clause “as may be prescribed “
In advance ruling under CGST Act, while application can be made for determining time and value of supply of goods or services or both, and not for place of supply.
Considering the magnitude of the exposure to disputes in determining place of supply, the National Bench or Regional Benches of the Appellate Tribunal shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in cases where one of the issues involved relates to the place of supply. (Ref sec 109(5) of CGST Act)
Disclaimer: The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon.
About the Author: Author is an Indirect Tax consultant in Chennai and also having Successfully completed training program in INDAS from E&Y and conducted Indirect Tax Audit in ICFR in various sectors during the last two years. He can be reached at email@example.com and firstname.lastname@example.org