GST TERMINOLOGY – PART I

[Dr. Sanjiv Agarwal]

GST TERMINOLOGY – PART I

Model GST Law, as placed in public domain on 15^th June, 2016 by the Empowered Committee of State Finance Ministers (EC) contains the draft of model GST law which provides a basis for CGST / SGST / IGST legislations to the enacted in near future. Like in any other statute or tax law, model law on GST also contains exhaustive terminology or interpretations for understanding and interpretation of the law.

Section 2 of Goods and Services Tax Act contains definitions of various terms, expressions and phrases which ought to be understood for the purpose of interpretation of tax law. It contains meanings of 109 such terms in 109 clauses in Section 2.

An attempt is being made in a series of articles to dissect or interpret the GST terminology so as to enable desired understanding of tax provisions.

To begin with, let's discuss the following terms in relation to 'address or place' in this part-

1. Address of delivery [Section 2(2)]
2. Address on record [Section 2(3)]
3. Fixed establishment [Section 2(46)]
4. Location of recipient of service [Section 2 (64)]
5. Location of supplier of service [ Section 2 (65)]
6. Place of business [Section 2(75)]
7. Principle place of business [Section 2(78)]
8. Usual place of residence [Section 2(105)]

Address of delivery [Section 2 (2)]

'Address of delivery' means the address of the recipient of goods and/or services indicated on the tax invoice issued by a taxable person for delivery of such goods and/or services.

This is new definition which is not there in the present law. Since GST is based on supply of goods or services, address for delivery becomes important and relevant.

Accordingly, following points are to be noted for 'address of delivery' –

1. It is an address of the recipient of goods or address of the recipient of services
2. It is that address which is indicated on the tax invoice
3. Taxable person should have issued such tax invoice for delivery of goods or services in question.

Literally, address means the particulars of the place where someone lives or an organization is situated. What is an 'invoice' is defined in section 2(60) read with section 23 to mean a document showing the description, quantity and value of goods or services, tax charged thereon and other prescribed particulars. 'Taxable person' is defined in section 2(96) read with section 9 to mean a person who carries on any business in India or any State and who is registered or required to be registered under Schedule III. Further, an agriculturist has not been considered as a taxable person. 'Person' is defined in section 2(74) of the GST law.

 Address on Record [Section 2(3)]

'Address on record' means the address of the recipient as available in the records of the supplier.

Address on Record was not defined earlier in the Finance Act, 1994.  This definition is a newly inserted definition.

'Address on record' means the address of the recipient as available in the records of the supplier.

In case of service and sale, recipients will be service receiver and buyer respectively. Therefore, address of service receiver and buyer as available in the records of service provider and seller shall be treated as 'address on record'.

Address on record would imply address in the records of supplier of goods or services. Such address may therefore, be different from the registered address or address of head office, factory etc. Even the address on record may be different from that in the records of the Department.

Fixed Establishment [Section 2(46)]

'Fixed establishment' means a place (other than the 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.

'Fixed establishment' does not include 'place of business' which has been separately defined in clause 75 of section 2.

Fixed establishment is –

1. Place other than place of business
2. It is characterized by a sufficient degree of –

1. Permanence, and
2. Suitable structure

3. It should be meant to supply services or to receive and use services for its own needs.

Such permanence should be have sufficient degree of permanence. What is sufficient is subjective and would depend upon facts and circumstances of each case. Examples of permanence may be property as lease or rent or own property. Suitable structure has been referred to in the form of human and technical resources.

Fixed establishment has been referred to only for the purpose of supply of or receiving of services, not for goods.

Temporary presence of staff by way of a short visit at a place cannot be called a fixed establishment. Also, the number of staff at a location is not important. What is relevant is the adequacy of the arrangement (of human and technical resources), to carry out an activity for a consideration, or to receive and use a service supplied. Similarly, it will be important to evaluate the permanence of the arrangement i.e. whether it is capable of executing the task.

In Faaborg – Gelting Linien A/S v. Finanzamt Finansburg (2012) 36 STT 119 (ECJ), it was held that for location of service provider, fixed establishment should be of a certain minimum size and both the human and technical resources necessary for provision of services must be permanently present. The ferry, boat or ship cannot be regarded as fixed establishment. In the instant case, place of restaurant was the fixed establishment and not the ‘on board conveyance’. For provision of service on board a conveyance, the first scheduled point of departure of that conveyance for the journey shall be place of provision of service.

Location of recipient of service [Section 2(64)]

 'Location of recipient of service' means:

1. where a supply is received at a place of business for which registration has been obtained, the location of such place of business;
2. where a supply is received at a place other than the place of business for which registration has been obtained, that is to say, a fixed establishment elsewhere, the location of such fixed establishment;
3. 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; and
4. in absence of such places, the location of the usual place of residence of the recipient;

According to Rule 2(i) of Place of Provision Rules, 2012, 'location of the service receiver' means:

1. where the recipient of service has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;
2. where the recipient of service is not covered under sub-clause (a):

1. the location of his business establishment; or
2. where services are used at a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or
3. where services are used at more than one establishment, whether business or fixed, the establishment most directly concerned with the use of the service; and
4. in the absence of such places, the usual place of residence of the recipient of service.

'Usual place of residence' in case of a body corporate means the place where it is incorporated or otherwise legally constituted. In the case of telecommunication service, the usual place of residence shall be the billing address.

In GST law, it is proposed to have focus on place of business and business establishment. In case of receipt of supply of service at registered place, place of business shall be the location of service supplier. Where supply is received at a place which is not registered i.e., a fixed establishment elsewhere, location of service recipient will be such fixed establishment and not place of business.

Location of supplier of service [Section 2(65)]

 'Location of supplier of service' means:

1. where a supply is made from a place of business for which registration has been obtained, the location of such place of business ;
2. where a supply is made from a place other than the place of business for which registration has been obtained, that is to say, a fixed establishment elsewhere, the location of such fixed establishment;
3. 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; and
4.  in absence of such places, the location of the usual place of residence of the supplier;

According to present Rule 2(h) of Place of Provision of Rules, 2012 'location of the service provider' means-

1. where the service provider has obtained a single registration, whether centralized or otherwise, the premises for which such registration has been obtained;
2. where the service provider is not covered under sub-clause (a):
   1. the location of his business establishment; or
   2. where the services are provided from a place other than the business establishment, that is to say, a fixed establishment elsewhere, the location of such establishment; or
   3. where services are provided from more than one establishment, whether business or fixed, the establishment most directly concerned with the provision of the service; and
   4. in the absence of such places, the usual place of residence of the service provider.

Thus the location in GST regime shall be based on place of business or fixed establishment, depending upon registration of place. Where service is supplied from more than one establishment, the location most directly concerned with supply shall be considered as location of supplier of service. Where it can not be identified as such, usual place of residence will be considered as the location of supplier of service.

Place of business [Section 2(75)]

'Place of business' includes-

1. a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, provides or receives goods and/or services; or
2. a place where a taxable person maintains his books of account; or
3. a place where a taxable person is engaged in business through an agent, by whatever name called;

The place of business would accordingly include the following places –

1. place from where business is ordinarily carried on,
2. warehouse,
3. godown,
4. any other place used for storing goods or place to provide or receive goods or services by taxable person,
5. place where books of accounts are maintained by  taxable person (it may be place of business of agency or any professional),
6. place from where a taxable person is engaged in business through agent by whatever name called.(like commission agent, C&F agent, consignment agent etc)

The definition given is an inclusive definition and not a comprehensive one. It will include any one or more or all of the aforementioned places.

Place of business is not defined in the present Central Excise or Service Tax law.

Principal Place of Business [Section 2(78)]

'Principal place of business' means the place of business specified as the principal place of business in the certificate of registration where the taxable person keeps and maintains the accounts and records as specified under section 42.

For a place of business to be a 'principal place of business', following conditions are essential –

1. It should be a place of business
2. It should be specified as such in registration certificate
3. Taxable person should keep and maintain the accounts and  records as required in section 42 at such place

Section 42 provide for maintenance of accounts and other record by registered person at his principal place of business, the true and correct account of –

• Production or manufacture of goods
• Inward or outward supply of goods / services
• Stock of goods
• Input tax credit availed
• Output tax payable and paid
• Such other particulars as prescribed

Section 42 also provides that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business concerned.

 

Usual place of residence [Section 2(105)]

'Usual place of residence' means:

1. in case of an individual, the place where he ordinarily resides.
2. in other cases, the place where the person, as defined in sub-section (74), is incorporated or otherwise legally constituted.

Usual place of residence has been specified for both, individuals as well as non-individuals as follows –

Taxable person	What is usual place of residence
Individuals	Place where an individual ordinarily resides
Other cases (Any person other than individual)	Place where much person is incorporated or otherwise legally constituted

Section 2(74) defines who is a 'person' which includes company, firm, HUF, LLP, corporation, association of persons, body of individuals, association of persons, body of individuals, Government, body corporate, local authority, cooperative society, trust and every artificial juridical person.

Under the present law, Place of Provision of Services Rules, 2012 define usual place of residence. The usual place of residence, in case of a body corporate, has been specified as the place where it is incorporated or otherwise legally constituted. The usual place of residence of an individual is the place (country, State etc.) where the individual spends most of his time for the period in question. It is likely to be the place where the individual has set up his home, or where he lives with his family or is in full time employment. Individuals are not treated as belonging in a country if they are short term, transitory visitors (for example if they are visiting as tourists, or to receive medical treatment or for a short term language/other course). An individual cannot have more than one place of usual residence.

(To be continued….)

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Discussions to this article

[Ganeshan Kalyani]

Nice article Sir. Your effort is appreciated. Thanks.