READING DOWN MODEL IGST ACT (PART-7)

[Dr. Sanjiv Agarwal]

Determination of place of supply of services is important for goods and Service Tax. Section 3 and 3A of IGST Act lay down principles for determining supply of goods and/ or services in the course of inter-state and intra-state trade or commerce. There provisions are subject to section 6 on place of supply of services.

Two terms are important for determination of place of supply of services viz, 'service' and 'supply'. 'Service' in terms of section 2(88) of GST Act means anything other than goods. 'Supply' is defined in section 3 of the CGST Act, 2016.

As discussed earlier in Part 2 of this series of articles, 'supply' includes-

• All forms of supply of goods and / or services
• Importation of services
• Supplies specified in Schedule-I (without consideration)
• Matters to be treated as supply of services as per Schedule-II

Under the present law, Place of Provision of Services Rules, 2012 govern the determination of place of provision of services. These rules shall be replaced by section (6)  of the model law.

Determination of Place Provision of Service (Section 66C)          

Section 66C of Finance Act, 1994 seeks to empower the Central Government to make rules to determine the place of provision of service having regard to the nature and description of various services.

Section 66C reads as under –

“(1)     The Central Government may, having regard to the nature and description of various services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided.

(2)       Any rule made under sub-section (1) shall not be invalid merely on the ground that  either the service provider or the service receiver or both are located at a place    being outside the taxable territory”.

Accordingly,

• Central Government has framed the rules and notified vide Notification No. 28/2012-ST, dated 20-6-2012 w.e.f. 1-7-2012.
• Such rules shall determine the place of provision of services for levy of service tax.
• Such rules shall determine-

 - Place where services are provided

- Place where services are deemed to have been provided, or

- Place where services are agreed to be provided, or

- Place where services are deemed to have been agreed to be provided

The place of provision of service rules will determine the place where the services shall be deemed to be provided. It’s taxability will be determined based on the location of its provision.

Place of Supply for IGST

Section 6 deals with determination of place of supply of services. This contain 13 sub-sections and stipulates different situations in which place of supply of services shall be ascertained.

In case of B2B (business to business) supply of services, the primary factor for determining the place of supply will be the location of the service recipient,  subject to certain exceptions.

As per sub-section (3), generally place of supply of services made to a registered person shall be the location of services receiver, except for services mentioned in sub-sections (4) to (15).

The provisions of section (6) will take into account the present Place of Provision of Services Rules, 2012 and as such, no separate rules are likely to be prescribed.

Unlike the present provisions to determine place of provision of service, where there is a general rule of destination based place (recipient) and a rule prescribing for order of rules to be applied, and a residual rule, section 6 of IGST law contains 15 sub-sections. While sub-sections 4 to 15 prescribe the determination of place of supply of specific services, sub-section (2) and (3) are the general principles for determination of supply is respect of registered person and other persons who are not registered persons. Sub-section 4 to 15 shall apply to both, registered persons and persons other than registered persons. As per sub-section (1), place of supply of services shall be determined in terms of section (6).

Registered / unregistered person          

Unlike the present place of provision of service norms, place of supply of services for IGST shall be determined on the basis of status of person who in recipient (i.e. whether he is registered or not. 'Registered person' is not defined either in CGST law or IGST law but taxable person has been defined. Going by the definition of taxable person in section 9 of the GST Act, it includes both, registered person and one who is required to be registered. So, we can assume that for place of supply, registered person is a taxable person who is registered u/s 19 and Schedule-III and other than registered person is a taxable person who is required to be registered but not so registered.

General Rule

As a general rule, the place of supply of service shall be determined as follows –

Sub-section of section 6	Supply of service to	Place of supply	Except
2	Registered person	Location of recipient (i.e. registered person)	Services listed in sub-section 4 to 15 of section 6
3	Any person, other than registered person	Location of recipient where address on record exists ; In other cases, location of supplier	Services listed in sub-section 4 to 15 of section 6

'Address on record' is defined in section 2(3) of the GST Act as the address of the recipient as available in the records of the supplier. The address therefore, shall be reckoned as that available with supplier and not as shown by the recipient. The supplier's address on record, if not correct may pose challenges to both the parties.

Place of supply of specific services

Place of supply of specific services shall be determined as per following table –

Place of supply of service

Sub-section	Service	Place of supply to Registered person	Place of supply to Other person
(4)	(a) in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work, or (b) 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, or (c) by way of accommodation in any immovable property for organizing any marriage or reception or matters related therewith, official, social, cultural, religious or business function including services provided in relation to such function at such property, or (d) any services ancillary to the services in clause (a), (b) and (c) above. (See note 1 below)	Location at which the immovable property or boat or vessel is located or intended to be located.	Location at which the immovable property or boat or vessel is located or intended to be located.
(5)	The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery	Location where the services are actually performed.	Location where the services are actually performed.
(6)	The place of supply of services in relation to training and performance appraisal	Location of such person	Location where the services are actually performed
(7)	The place of supply of services provided by way of admission to a cultural, artistic, sporting, scientific, educational, or entertainment event or amusement park or any other place and services ancillary thereto.	Place where the event is actually held or where the park or such other place is located.	Place where the event is actually held or where the park or such other place is located.
(8)	The place of supply of services provided by way of- (a) organization of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of service in relation to a conference, fair, exhibition, celebration or similar events, or (b) services ancillary to organization of any of the above events or services, or assigning of sponsorship of any of the above events. (See Note to below 2)	Location of such person.	Place where the event is actually held.
(9)	The place of supply of services by way of transportation of goods, including by mail or courier	Location of such person	Location at which such goods are handed over for their transportation.
(10)	The place of supply of passenger transportation service [Where 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, the place of supply of such service shall be determined in the manner specified in sub-sections (2) or (3), as the case may be.] (See Note 3 below)	Location of such person	Place where the passenger embarks on the conveyance for a continuous journey.
(11)	The place of supply of services on board a conveyance such as vessel, aircraft, train or motor vehicle.	Location of the first scheduled point of departure of that conveyance for the journey.	Location of the first scheduled point of departure of that conveyance for the journey.
(12)	The place of supply of telecommunication services including data transfer, broadcasting, cable and direct to home television services to any person shall- (a) in case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna. (b) in case of mobile connection for telecommunication and internet services provided on post-paid basis. (c) in cases where mobile connection for telecommunication and internet service are provided on pre-payment through a voucher or any other means. (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 record of the supplier of services shall be the place of supply of such service.)	Location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services. Location of billing address of the recipient of services on record of the supplier of services; Location where such pre-payment is received or such vouchers are sold:	Location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services. Location of billing address of the recipient of services on record of the supplier of services; Location where such pre-payment is received or such vouchers are sold:
(13)	The place of supply of banking and other financial services including stock broking services to any person. If the service is not linked to the account of the recipient of services.	Location of the recipient of services on the records of the supplier of services. Location of the supplier of services.	Location of the recipient of services on the records of the supplier of services. Location of the supplier of services.
(14)	The place of supply of insurance services	Location of such person	Location of the recipient of services on the records of the supplier of services.
(15)	The place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for identifiable States.	Located in each of such States and the value of such supplies specific to each State shall be in proportion to amount attributable to service provided by way of dissemination in the respective States 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 reasonable basis as may be prescribed in this behalf.	Located in each of such States and the value of such supplies specific to each State shall be in proportion to amount attributable to service provided by way of dissemination in the respective States 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 reasonable basis as may be prescribed in this behalf.

Note 1

Where the immovable property or boat or vessel is located in more than one State, the supply of service shall be treated as made in each of the States 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 reasonable basis as may be prescribed in this behalf.

Note 2

Where the event is held in more than one State 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 the each of the States in proportion to the value of services so provided in each State as ascertained from the terms of the contract or agreement entered into in this regard or, in absence of such contract or agreement, on such other reasonable basis as may be prescribed in this behalf.

Note 3

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.

It would, therefore be obligatory for the supplier / recipient of service to (i) get  registered, and (ii) identify the category of service [if falling under sub-sections (4) to (15)] to apply relevant provision failing which section 2 or 3 shall apply.

(To be continued……)