General Rules of Place of Supply of Services

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Date: 07 Feb 2023


General Rules of Place of Supply of Services

 

The taxpayer must pay tax at the time and according to the place of supply under the goods and service tax (Or "GST") Law. The location where services are supplied is also where they are consumed. 

 

Under the IGST Act, provisions relating to "Place of Supply" are explained. Here we will explain the "Place of supply of goods under GST" in detail. 

 

However, there are particular situations or regulations for figuring out the place of supply or services provided directly in connection with real estate, shipping, and many other particular services. 

 

Importance Of Place Of Supply   

Let's first examine the importance of a precise supplier location determination for organisations. The following are some of the reasons for it. 

  • According to section 19 of the IGST Act and section 70 of the CGST Act, incorrectly classifying a supply as intra-state rather than interstate or vice versa may cause hardship for the taxpayer. 

  • When incorrect taxes have been paid based on an incorrect classification, the taxpayer must require a refund.

  • On the basis of the revised/correct classification, the taxpayer will be required to pay the correct tax and interest for the delay. 

  • Additionally, correctly knowing the supply site will help us determine the tax incidence. If it is established that the place of supply is outside of India, no tax will be due on that transaction.

 

Determining The Place Of Supply Of Services     

GST is a destination-based tax, sometimes known as a consumption tax. As such, tax is imposed and paid to the state where goods and services are consumed. There are three tax levels under GST: IGST, CGST, and SGST. Each level's tax is assessed based on the supplier's location and the location of the "Place Of Supply" as defined by the government.

 

When a transaction is intra-state, CGST and SGST are imposed, while IGST is imposed when the transaction is inter-state. The following two ideas are crucial for comprehending where services are supplied.

  • Location of the recipient of services 

  • Location of 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 

 

Case

Location Of Recipient Of Service

When a supply is made at an establishment where registration has been obtained

Such a place of business

When a supply is made somewhere other than the business location for which registration has been obtained (a fixed establishment elsewhere)

Such fixed establishments

If a supply is received at more than one institution, whether it is a fixed establishment or a location of the business

The location of the establishment that is most directly involved with supply receipt

In the absence of such places

The location of the recipient's typical residence.

 

Location Of The Provider/Supplier Of Services

 

Case

Location Of Supplier Of Services

When a supply is made from an establishment where registration has been obtained

The location of such a place of business

If a supply is made outside of the location where registration has been secured for the business (a fixed establishment elsewhere)

Where such an established establishment is located;

Whenever a supply is made from more than one establishment, whether it be a permanent or commercial location,

the location of the establishment where supply provision is most directly concerned

In the absence of such places,

The supplier's primary place of residence



 

The following categories can be used to broadly group transactions involving the supply of services:

 

Domestic Transactions

These are the transactions in which the service provider and the service recipient are Indian citizens. Domestic transactions fall into the following categories:

  • Inter-State (i.e. between two different states)

  • Intra-State (i.e. within the same state)

 

General Rule: The location of the service recipient will typically be the place of supply for services (the recipient needs to be a registered person).

 

When a service is rendered to an unregistered person, the following locations will serve as the site of supply:

  • Location of the Service Recipient (if Address Information is Available);

  • Otherwise, the location of the service provider

 

International Transactions

The service recipient or service provider is located outside India in these transactions. 

General Rule: For services considered international transactions, the following location must be used:

  • Where the service recipient is located

  • When the location of the service receiver is unavailable, the supplier's location will serve as the site of provision.