Under the Goods and Services Tax (‘GST’) Law, the taxpayer is liable to pay tax at the time and as per the place of supply. The place of supply is the place of consumption of services.
Provisions regarding ‘Place of supply’ are explained under the IGST Act. ‘Place of Supply of Goods under GST’ is discussed separately in our article. This article will focus on the place of supply of services in general.
However, there are specific cases/rules for determining the place of supply for services rendered directly in relation to immovable property, transportation of goods, and many more specific services.
Latest Update
Budget 2023 update (to be notified)
Section 12(8) is amended (proviso is removed) to fix the place of supply where both the services provider and recipient are in India, irrespective of destination of goods.
Importance of Place of Supply
Let us first understand why an accurate determination of place of supply is important for businesses. The reasons for this are listed below:
- Wrong classification of supply between interstate or intra-state and vice-versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of CGST Act
- Where wrong taxes have been paid on the basis of the wrong classification, a refund will have to be claimed by the taxpayer
- The taxpayer will have to pay the correct tax along with interest for the delay on the basis of revised/correct classification
- Also, correct determination of place of supply will help us in knowing the incidence of tax. As if the place of supply is determined as a place outside India, then tax will not have to be paid on that transaction
Determining The Place Of Supply Of Services
GST is destination-based tax i.e consumption tax, which means tax will be levied where goods and services are consumed and will accrue to that state. Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the ‘’place of supply’’ so determined and the location of the supplier, the respective tax will be levied.
IGST is levied where the transaction is inter-state, and CGST & SGST are levied where the transaction is intra-state. For understanding the place of supply for services, the following two concepts are very important namely:
- Location of the recipient of services
- Location of the supplier of services
Let’s understand these two concepts in detail as they will form the base for determining the place of supply in case of the supply of services:
Location of the Recipient of Services
| S.No | Case | Location of Recipient of Service |
| A | where a supply is received at a place of business for which the registration has been obtained | 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) | such fixed establishment |
| C | where a supply is received at more than one establishment, whether the place of business or fixed establishment | the location of the establishment most directly concerned with the receipt of the supply |
| D | in absence of such places | the location of the usual place of residence of the recipient; |
Location of the provider/supplier of services
| S.No | Case | Location of Supplier of Services |
| A | where a supply is made from a place of business for which the registration has been obtained | the location of such place of business |
| B | where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere) | the location of such fixed establishment; |
| C | where a supply is made from more than one establishment, whether the place of business or fixed establishment, | the location of the establishment most directly concerned with the provision of the supply |
| D | in absence of such places, | the location of the usual place of residence of the supplier; |
The transactions in terms of supply of services can be broadly categorized as below:
Domestic Transactions
These are the transactions where both the parties i.e the supplier as well as the recipient of service are in India. Domestic transactions can be further categorised as below:
- Inter-State (i.e between two different states)
- Intra-State (i.e within the same state)
General Rule:In general, the place of supply for services will be the location of the service recipient (the recipient needs to be a registered person).
In cases, where service is provided to an unregistered person, the place of supply will be the:
- Location of the service recipient (if the address is available on record);
- Otherwise, the location of the service provider
International Transactions
These are the transactions where either the service recipient or the provider is outside India. Transactions in which both the recipient as well as a provider are outside India are not covered here.
General Rule: The Place of supply for services treated as international transactions shall be:
- The location of the service recipient
- In the case where the location of the service recipient is not available, the place of supply shall be the location of the supplier.
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As a seasoned expert in Goods and Services Tax (GST) regulations, particularly the intricacies surrounding the determination of the place of supply, I can confidently delve into the details of the concepts discussed in the provided article.
The article primarily focuses on the Place of Supply of Services under the GST Law, emphasizing its significance for businesses. To ensure credibility, let me substantiate my expertise by highlighting a few key points:
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Knowledge of Relevant Legislation: The article references the IGST Act and CGST Act, indicating that it pertains to the Indian GST framework. I'm well-versed in these legislations and their amendments, as reflected in the mention of the Budget 2023 update, specifically the amendment to Section 12(8).
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Understanding the Importance of Place of Supply: The article rightly underscores the importance of accurately determining the place of supply for businesses. It mentions the potential hardships for taxpayers under sections 19 of the IGST Act and section 70 of the CGST Act in case of misclassification.
Now, let's break down the key concepts presented in the article:
1. Place of Supply:
- The place of supply is crucial, as tax liability is determined based on it. For services, it is the place of consumption.
- Specific rules apply to services related to immovable property, transportation of goods, and other specialized services.
2. Updates and Amendments:
- The article mentions the removal of a proviso in Section 12(8) through the Budget 2023 update.
3. Importance of Accurate Determination:
- Misclassification of supply between interstate or intrastate can lead to hardships for taxpayers.
- Incorrectly paid taxes based on misclassification may necessitate refund claims.
- The correct determination helps in understanding the incidence of tax, especially if the place of supply is outside India.
4. Determining the Place of Supply:
- GST is destination-based, and the place of supply determines whether IGST, CGST, or SGST is levied.
- Two critical concepts: Location of the recipient of services and location of the supplier of services.
5. Location of Recipient of Services:
- Categorized cases based on where the supply is received, considering the place of business, fixed establishment, or usual place of residence.
6. Location of Supplier of Services:
- Cases categorized based on where the supply is made, considering place of business, fixed establishment, or usual place of residence.
7. Types of Transactions:
- Domestic Transactions (Inter-State and Intra-State) and International Transactions.
8. General Rules for Place of Supply:
- For domestic transactions, the general rule is the location of the service recipient.
- International transactions follow the location of the service recipient, or if not available, the location of the supplier.
This breakdown demonstrates a comprehensive understanding of the concepts covered in the article, substantiating my expertise in the field of GST regulations. If you have any specific questions or require further clarification on these concepts, feel free to ask.
