Place of Supply under GST (Inter-state supplies Vs. Intra-state supplies)

CA Mithun Khatry

Though the union government’s slogan for GST is “One nation, one tax” which in general terms means single tax on all goods & services across India, however the real picture is far away from this illusion created by the government. Under the proposed GST regime, not only there will be four separate taxes i.e. CGST, SGST, UGST & IGST but also about five to six different tax rates for each such taxes. In addition to this, powers to levy tax on services have been vested to states also, who at this point of time are in-efficient to properly decode the nitty-gritty’s of this proposed tax regime. Government, instead of bringing both goods & services at par under the proposed GST regime, rather at many places made separate provisions as regard to levy of tax on Goods & Services. None the less, separate provisions have also been made for levying tax on inter-state supplies & intra-state supplies.

Also all goods are not supposed to be covered under GST. For example alcoholic liquor for human consumption has been kept out of preview of GST, while taxation of some petroleum products has been deferred under the proposed GST regime.

So to properly tax a particular supply under GST one has to undergo a long nerve wracking session, first of all one must find out the nature of supply i.e. whether it is a supply of goods or is it a supply of services, if it is a supply of goods then whether such goods are inputs or they are capital goods. Once it is established that whether it is goods or services, than the next step is to find out the exact classification of such goods or services as per HSN codes & accounting codes, to determine the rate of tax applicable to such supply, then finally comes the provisions of place of supply to decide whether such supply is an inter-state supply or intrastate supply.

Actually the present GST law is drafted very hurriedly by mix & match of all the provisions related to VAT & Service Tax in India. At many places provisions have just been copied from the existing laws particularly service tax laws. It seems that GST Law is actually a mixture of VAT & Service Tax, where a half hearted attempt has been made to keep the mixture in right composition. Proper training have not been provided to staff & officers of the proposed GST regime. No proper arrangements have been made to educate businessmen who are actually going to bear the wrath of this hastily drafted, one of the biggest tax reform in India. Actually the slogan for GST in India at this point of time, should be ”Many Taxes, many confusions, in one Nation “.

In case GST is implemented from 1^st of July 2017, the one thing is for sure, that with plethora of litigation coming on the way, there is definitely going to be good time for advocates & consultants, practising indirect tax laws in India.

People of India were rather expecting a simpler & easier tax reform in India which should have been explained in such a lucid manner that even a layman can understand it, anyhow as the matter of fact that the four central GST bills have already been passed by the parliament and about 8 states have also passed their respective state bills, we must understand the law as it is. So, an attempt has been made in this article to discuss in brief some of the provisions related to place of supply of goods & services under the proposed GST regime.

Section 9 of CGST Act 2017 states that CGST shall be levied on all intra-state supplies of goods or services or both, at such rates, not exceeding twenty percent, similarly Section 7 of UGST Act 2017 states that UGST shall be levied on all intra-State supplies of goods or services or both at such rates, not exceeding twenty per cent. Respective SGST Acts of various states also have the similar provision that SGST shall be levied on all intra-State supplies of goods or services or both at such rates, not exceeding twenty per cent.

Section 5 of IGST Act 2017 states that IGST shall be levied on all inter-State supplies of goods or services or both at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council. Also IGST on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

It is important to note that, tax on the supply of alcoholic liquor for human consumption has been kept out of preview of GST and tax on supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel has been deferred till such date as may be notified by the Government on the recommendations of the Council.

So it is clear from the above discussions that CGST & SGST/UGST shall be levied on intra state supplies and IGST shall be levied on inter-state supplies. Under the existing laws, the concept of inter-state & intra-state supplies was limited to sales of goods only as service tax was levied uniformly all over India by the union government. But now since states will also be levying tax on services, so it is very important to clearly demark the supplies as inter-state or intra-state supplies.

Laws under the existing tax structure were more or less settled about the concept of interstate supply of goods, but interstate supply of services is a relatively new concept under the proposed GST regime. Though an attempt has been made by the law makers to provide some clarity in a few situations where interstate supply of services is possible, but most of those references have been drawn from the place of supply rules under service tax and lots of ambiguities are there which are still not addressed under the proposed GST law.

GST is a destination based tax and generally to know whether a supply is inter-state or intra-state, two things are very important, first thing is to know the location of supplier and second thing is to know the place of supply. In case location of supplier & place of supply fall under same state / union territory, then it is an intra-state supply otherwise it is an inter-state supply. But there are many situations where this general rule does not apply, so some special provisions have also been drafted under GST to determine the place of supply in such cases.

In this article we will try to bring about a conceptual clarify in the matter of inter-state & intra-state supply of goods & services.

For the convenience and better understanding of the readers, this article has been divided into two sections viz. goods and services.

For the purpose of this article, reference to any section unless otherwise specifically mentioned, means the corresponding section under IGST Act’2017.

GOODS

As per section 2(52) of CGST Act 2017 “goods” means every kind of movable property other than money and

securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

 Inter-state supply of goods [Section 7]

• Where the location of the supplier and the place of supply are in two different States; or in two different Union territories, or in a State and a Union territory, such supply shall be treated as a supply of goods in the course of inter-State trade or commerce.
• Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall also be treated to be a supply of goods in the course of inter-State trade or commerce.
• Supply of goods in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall also be treated to be an inter-state supply.

Intra-state supply of goods [Section 8]

Where the location of the supplier and the place of supply of goods are in the same State or same Union territory such supply shall be treated as intra-State supply.

However, the following supply of goods even if made within state, shall not be treated as intra-State supply:

• import of goods,
• export of goods,
• supply of goods to SEZ unit,
• supply of goods by SEZ unit,
• supply of goods to SEZ developer,
• supply of goods by SEZ developer,
• supplies made to a tourist leaving India being a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes, where such supply of goods is taken out of India by him, it shall be treated as supply of exports out of India.

How to determine place of supply and location of supplier in case of supply of goods?

• The place of supply of goods imported into India shall be the location of the importer[Section 11]
• The place of supply of goods exported from India shall be the location outside India [Section 11]
• The place of supply of such goods where the supply involves movement of goods (whether by the supplier or the recipient or by any other person)shall be the location of the goods at the time at which the movement of goods terminates for the delivery to the recipient [section 10(1)(a)] e. place where risks and rewards associated with such goods are transferred to the recipient. This clause is applicable where contract of supply required the goods to be delivered at a pre-determined destination.
• The place of supply of such goods where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person [section 10(1)(b)]. This clause may be applicable in case of transfer of goods in transit, penultimate sales and predetermined sales. In our opinion, here such person means the third person.
• The place of supply of such goods where the supply does not involve movement of goods, whether by the supplier or the recipient, shall be the location of such goods at the time of the delivery to the recipient.[section 10(1)(c)]. This clause may be applicable in situations where risks and rewards related to goods are transferred as soon as such goods are sold to the customer or where such goods belonging to seller are already lying with the buyer at the time of sales; like goods of seller kept in godown, factory, warehouse or some other place of the person as custodian of goods, where such goods are eventually sold to the custodian itself.
• The place of supply of such goods where the goods are assembled or installed at site shall be the place of such installation or assembly. [section 10(1)(d)]. However in our opinion, in case of more than two states are involved in a single transaction and such installation or assembly has also been done by the same supplier himself or by some person authorized to act on behalf of supplier, then only the place of installation or assembly shall be the place of supply of goods, otherwise place of supply shall be the state where such goods are delivered to the recipient for assembly or installation elsewhere.
• The place of supply of goods where such goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location at which such goods are taken on board. [section 10(1)(e)].
  As per the provisions of Section 7(1)(a) of CGST Act 2017 “supply” includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. So the Act is silent in cases where goods are agreed to be sold on board may be through some sort of marketing pamphlets or otherwise and goods are home delivered at the address of the passenger and hence such goods are never taken on board.
  Under the existing tax laws, only supply of food in an air-conditioned restaurant is considered to be supply of services and supply of foods elsewhere is treated as supply of goods, however Para 6 of Schedule-II of CGST Act’2017 states that any composite supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration shall be treated as a supply of services. Separate provisions are provided under section 12 of IGST Act’2017 to determine place of supply in case of such supply of services, so it is not clear that which provisions to be applied in these situations.
  In our point of view, intention of the legislature must be to treat a particular supply as “supply of goods” where such goods including food items are sold as it is, may be in some packed condition or otherwise and a particular supply shall be treated as “supply of services” where the same are not only supplied but also served to the customer i.e. where at least a little bit of service element is also present in such supply. So now in case food served anywhere shall be treated as supply of services.
• Where the place of supply as determined above is in the territorial waters, in such cases the Place of supply shall be deemed to be in that coastal State or Union territory where the nearest point of the appropriate baseline is located. [Section 9]
• Where the location of the supplier is in the territorial waters, in such cases the location of supplier shall be deemed to be in that coastal State or Union territory where the nearest point of the appropriate baseline is located. [Section 9]

SERVICES

As per section 2(102) of CGST Act 2017, “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

Inter-state supply of services [Section 7]

Where the location of the supplier and the place of supply are in two different States; or in two different Union territories, or in a State and a Union territory, such supply shall be treated as a supply of services in the course of inter-State trade or commerce.

Supply of services imported into the territory of India, shall also be treated to be a supply of services in the course of inter-State trade or commerce.

Supply of services in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be an inter-state supply.

Intra-state supply of services [Section 8]

Where the location of the supplier and the place of supply of services are in the same State or same Union territory such supply shall be treated as intra-State supply.

However in following cases such supplies shall be treated as inter-state supplies even if both the location of supplier & place of supply are within same state or union territory:

• import of services,
• export of services,
• supply of services to SEZ unit,
• supply of services by SEZ unit,
• supply of services to SEZ developer,
• supply of services by SEZ developer.

Section 12 guides us to determine the place of supply where the location of both supplier and the recipient is in India.

S.No.	Services	Location of Supply
1.	Section 12(3) In case of: Services provided directly in relation to an immovable property. (including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents ); and Service provided by way of grant of rights to use immovable property; and Service provided for carrying out or co-ordination of construction work; and Service provided by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; and Service provided by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; and Any other service ancillary to the services referred above. 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, and in the absence of such contract or agreement, on such other basis as may be prescribed.	Place of supply of services shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located. However, if the location of such property is located or intended to be located outside India, the place of supply shall be the location of the recipient.
2	Section 12(4) In case of: Restaurant and catering services Personal grooming services Fitness services Beauty treatment services Health services (including cosmetic and plastic surgery )	The place of supply of shall be the location where the services are actually performed.
3	Section 12(5)(a) In case of services provided in relation to training and performance appraisal to a registered person.	Place of supply shall be the location of such person.
4	Section 12(5)(b) In case of services provided in relation to training and performance appraisal to a person other than a registered person,	Place of supply shall be the location where the services are actually performed.
5	Section 12(6) In case of services 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.	Place of supply shall be the place where the event is actually held or where the park or such other place is located.
6	Section 12(7) In case of 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) Services ancillary to organisation of any of the events or services referred above or assigning of sponsorship to such events. 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.	In case such supplies are provided to a registered person, the place of supply shall be the location of such person. Otherwise, the place of supply shall be the place where the event is actually held.   However, in case such event is held outside India, the place of supply shall be the location of the recipient.
7	Section 12(8) In case of services provided by way of transportation of goods. (including by mail or courier)	In case such supplies are provided to a registered person, the place of supply shall be the location of such person; Otherwise the place of supply shall be the location at which such goods are handed over for their transportation.
8	Section 12(9) In case of services provided by way of passenger transportation. for the purposes above, 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. The word “continuous journey” has been defined under section 2(3), which means a journey for which a single or more than one ticket or invoice is issued at the same time, either by a single supplier of service or through an agent acting on behalf of more than one supplier of service, and which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued. “stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time.	In case such supplies are provided to a registered person, the place of supply shall be the location of such person. In case such supplies are provided to a un-registered person, the place of supply shall be: where passenger embarks at that time, the place where the passenger embarks on the conveyance i.e. go on-board conveyance for a continuous journey. where passenger does not embarks at that time but the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage, then place of supply shall be: the location of the recipient where the address on record exists; or location of the supplier where no such address exists.
9	Section 12(10) In case of services provided on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle.	Place of supply shall be the location of the first scheduled point of departure of that conveyance for the journey.
10	Section 12(11)(a) In case of supply of telecommunication services (including data transfer, broadcasting, cable and direct to home television services) provided by the way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna.	Place of supply shall be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services.
11	Section 12(11)(b) In case of supply of telecommunication services (including data transfer, broadcasting, cable and direct to home television services) provided by the way of mobile connection for telecommunication and internet services on post-paid basis.	Place of supply shall be the location of billing address of the recipient of services on the record of the supplier of services.
12	Section 12(11)(c)(i) In case of supply of telecommunication services (including data transfer, broadcasting, cable and direct to home television services) provided by the way of mobile connection for telecommunication and internet services on pre-payment basis either through a voucher or any other means, through a selling agent or a re-seller or a distributor of subscriber identity module card or re-charge voucher.	Place of supply shall be the address of the selling agent or re-seller or distributor as per the record of the supplier at the time of Supply.
13	Section 12(11)(c)(ii) In case of supply of telecommunication services (including data transfer, broadcasting, cable and direct to home television services) provided by the way of mobile connection for telecommunication and internet services on pre-payment basis either through a voucher or any other means directly to the final subscriber.	Place of supply shall be the location where such prepayment is received or such vouchers are sold.
14	Section 12(11)(d) In case of supply of telecommunication services (including data transfer, broadcasting, cable and direct to home television services) provided in other cases not mentioned above.	Place of supply shall be 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 the location of the supplier of services.
For the purpose of section 12(11) 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. Also 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.  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.
15	Section 12(12) In case of supply of banking and other financial services. (including stock broking services)	Place of supply shall be the location of the recipient of services on the records of the supplier of services. However, 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.
16	Section 12(13) In case of supply of insurance services. .	In case such supplies are provided to a registered person, the place of supply shall be the location of such person, otherwise the place of  supply shall be the location of the recipient of services on the records of the supplier of services
17	Section 12(14) In case of advertisement services provided 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. Also 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.	The place of supply shall be taken as being in each of such States or Union territories
18	Section 12(2)(a) In case of other services not mentioned above and made to a registered person	The place of supply shall be the location of such registered person.
19	Section 12(2)(b) In case of other services not mentioned above and made to an un-registered person	The place of supply shall be the location of the recipient where the address on record exists otherwise the place of supply shall be the location of the supplier of services.

Section 13 guides us to determine the place of supply where the location of the supplier or the recipient is outside India.

S.No.	Services	Location of Supply
1.	Section 13(3)(a) In case of 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 for example some job work done on goods supplied by customer, where such goods after job work shall be used within taxable territory by such customer. However 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.	The place of supply shall be the location where the services are actually performed.   However 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.
2.	Section 13(3)(b) In case of 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.	The place of supply shall be the location where the services are actually performed.
3.	Section 13(4) In case of services supplied directly in relation to an immovable property  like: 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	The place of supply shall be the place where the immovable property is located or intended to be located.
4.	Section 13(5) In case of services supplied by way of admission to/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 organization.	The place of supply shall be the place where the event is actually held.
Section 13(6) Where any services referred above are 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.
Section 13(7) Where the services referred above 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.
5.	Section 13(8) In case of: services by a banking company/NBFC/ financial institution provided to an interest bearing account holders (including NRE & NRO accounts); services supplied  being an intermediary services; services consisting of hiring of means of transport up to a period of one month.(including yachts but excluding aircraft and vessels) as per section 2(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.	The place of supply shall be the location of the supplier of services
6.	Section 13(9) In case of supply of services of transportation of goods. (other than by way of mail or courier)	The place of supply shall be the place of destination of such goods
7.	Section 13(10) In case of supply of services in respect of passenger transportation services Note: Meaning of continuous journey has already been explained before.	The place of supply shall be the place where the passenger embarks on the conveyance for a continuous journey.
8.	Section 13(11) In case 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)	The place of supply shall be the first scheduled point of departure of that conveyance for the journey.
9.	Section 13(2) In case of other services not mentioned above and where the location of the recipient of services is available in the ordinary course of business	The place of supply shall be the location of the recipient of services.
10.	Proviso to Section 13(2) In case of other services not mentioned above and 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.

As we have seen at many place above, that the place of supply of service is generally determined by the “location of the recipient of services” or by the “location of the supplier of services”. Now the question arises as to how do we  determine the “location of the recipient of services” or the “location of the supplier of services”?

Section 2 (14) of IGST Act 2017 provides that the “location of the recipient of services” means:

Situation	location of the recipient of services
(a) where a supply is received at a place of business for which the registration has been obtained	location of the recipient of services shall be, the location of such place of business.
(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere)	location of the recipient of services shall be the location of such fixed establishment.
(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment	location of the recipient of services shall be the location of the establishment most directly concerned with the receipt of the supply.
(d) in absence of such places	location of the recipient of services shall be the location of the usual place of residence of the recipient.

Section 2 (15) of IGST Act 2017 provides that the “location of the supplier of services” means:

Situation	location of the supplier of services
(a) where a supply is made from a place of business for which the registration has been obtained	location of the supplier of services shall be, 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),	location of the supplier of services shall be, 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	location of the supplier of services shall be, the location of the establishment most directly concerned with the provision of the supply.
(d) in absence of such places	location of the supplier of services shall be,the location of the usual place of residence of the supplier.

Here “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. [Section 2(7)]

Special provision for payment of tax by a supplier of online information and database access or retrieval services.

Special provisions have been made for supply of online information and database access or retrieval services under IGST Act’ 2017. Section 13(2) of IGST Act’2017 provides provisions to decide place of supply in case of such services & section 14 fixes the responsibility of the person liable to pay tax for such services. But before we discuss these provisions we must understand the meaning of online information and database access or retrieval services.

As per section 2(17) of IGST Act 2017 “online information and database access or retrieval services” means services whose delivery is mediated by information technology over the internet or an electronic network

and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as,––

(i) advertising on the internet;

(ii) providing cloud services;

(iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;

(iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;

(v) online supplies of digital content (movies, television shows, music and the like);

(vi) digital data storage; and

(vii) online gaming;

Most of the times, it becomes very difficult to trace the location of supplier of these services as the servers through which these services are provided are either remotely located abroad or sometimes they are located at some anonymous location. Therefore, in case of supply of such services, the place of such supply shall be the location of the recipient of services. [Section 13(12)]

To impose tax on these services, the location of the recipient shall be in taxable territory and the 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 billing address of the recipient of services is in the taxable territory;

(c) 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;

(d) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

(e) the internet protocol address of the device used by the recipient of services 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

Once the place of supply is decided and conditions required to impose tax in case of such supplies are fulfilled, the next thing to decide is the person who is liable to pay tax on such supplies. GST being a destination based tax, though the location or place of such supply is determined by the location of the recipient, but it does not necessarily means that tax has also to be paid by the recipient. So who will pay the taxes in case services are provided from some anonymous location or some location abroad?

In case such supply is

Made by any person located in a non-taxable territory and

Received by a non-taxable online recipient, directly from the supplier

Such intermediary located in the non-taxable territory, shall be deemed to be the recipient of such services and shall be deemed to be supplying such services to the non-taxable online recipient.

So such intermediary shall be liable to pay tax for such services, However in case intermediary satisfies the following conditions, he shall not be held liable for tax on such services and supplier will pay the taxes:

(a) the invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory;

(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its charge which is that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services;

(c) the intermediary involved in the supply does not authorise delivery; and

(d) the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.

Here “non-taxable online recipient” means ·any government, local authority, governmental authority, set up by an Act of Parliament or a State Legislature or established by any Government, with ninety percent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution; an individual or any other person not registered and receiving such services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

Though non-taxable territory has not been defined under IGST Act’2017 but as per section 2(22) “taxable territory” means the territory to which the provisions of this Act apply, so we can easily interpret the meaning of non-taxable territory from this as the territory to which the provisions of this Act does not apply like State of Jammu & Kashmir or any location abroad.

as per section 2(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

Such supplier shall, for payment of IGST, take a single registration under the Simplified Registration Scheme to be notified by the Government. [Section 14(2) of IGST Act]. Alternatively, any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay IGST on behalf of the supplier. In case such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.

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