How to Determine 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 and SGST and based on the ‘’place of supply’’ so determined, the respective tax will be levied. IGST is levied where transaction is inter-state, and CGST and SGST are levied where the transaction is intra-state. For understanding 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 supply of services:
1. a) Location of the recipient of services:
1. b) Location of the provider/supplier of services:
The transactions in terms of supply of services can be broadly categorized as below:
1. Domestic Transactions
These are the transactions where both the parties i.e the supplier as well as recipient of service are in India. Domestic transactions can be further categorized as below:
Inter-State (i.e between two different states)
Intra-State (i.e within the same state)
General Rule for Domestic Transactions
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:
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)
location of service provider (if location of recipient is not available)
The special cases under this classification will be discussed in detail in next article.
2. International Transactions
These are the transactions where either of the service recipient or the provider is outside India. Transactions in which both the recipient as well as provider are outside India are not covered here.
General Rule for International Transactions
The place of supply, for services treated as international transactions, will be:
the location of service recipient
the place of supply shall be location of the supplier, in case where the location of service recipient is not available
Time of Supply under Reverse Charge
Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. In case of reverse charge, the time of supply shall be the earliest of the following dates:
*the date of payment
OR
*the date immediately after sixty (60) days from the date of issue of invoice by the supplier (30 days for goods)
If it is not possible to determine the time of supply using the above rules, then the time of supply shall be the date of entry in the books of account of the receiver of service.
For the first clause, the date of payment shall be earlier of:
*the date on which the recipient entered the payment in his books
OR
the date on which the payment is debited from his bank accounts
When Supplier is Located Outside India
In case of ‘associated enterprises’, where the supplier of service is located outside India, the time of supply shall be:
*the date of entry in the books of account of the receiver
OR
*the date of payment, whichever is earlier
Let’s understand this with an example. Assuming for a transaction:
If for some reason the time of supply could not be determined supply using the above clauses, then it would be 18th July 2018 i.e., date of entry in books.
