faq : it is a destination based tax on consumption of ... · gst law article 246a(1) every state...

FAQ : It is a destination based tax on consumption of goods andservices. It is proposed to be levied at all stages right frommanufacture up to final consumption with credit of taxes paid atprevious stages available as setoff. In a nutshell, only value additionwill be taxed and burden of tax is to be borne by the final consumer.

04.04.2020 2

GST Law

Article 246A(1)

Every state can make laws w.r.t

goods and service tax imposed by the

union or state.

Article 246A(2)

Parliament has power to make laws

w.r.t goods and service tax where the transaction is

inter-state

Article 269A

Parliament formulate principles

for inter-state supply including

supply in the course of import and

export

04.04.2020 © GST & INDIRECT TAXES COMMITTEE, ICAI 3


Exports

Imports

Interstate

Where the location of supplier and place of supply:

Section 7 of IGST- Inter state Supply

Two

different

States

Two different

Union

Territories

State and a Union

territory


Goods imported into India

till they cross custom frontiers

SEC 7(1) / 7(3)

SEC 7(2) / (4)


Lo

ca

tio

n o

f S

up

plie

r o

f S

erv

ice

Supply made from registered POB

Location of such Place of Business

Supply made from premises other than

POB

The location of such Fixed Establishment

Supply is made from more than 1

establishment

Establishment most directly concerned with provision of the supply

In absence of such places

Place of residence of supplier

Examples


POS u/s 10/12

Location of Supplier

Supply of Goods or Services

POS u/s 10/12

DNH

Supply of Goods or services

POS u/s 10/12

Between 2 different states

Between 2 UT


04.04.2020© GST & INDIRECT TAXES COMMITTEE, ICAI 8

Examples of Inter state

Mexico

Custom

Frontier

Mexico

Services

Supply of goods or services or both – Section 7(5)

supplier is located in India and the place of supply is outside India;

to or by a Special Economic Zone developer or a Special Economic Zone unit; or

in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

Inter state supply



Intrastate

Section 8 of IGST- Intra state Supply of Goods

Subject to the provisions of section 10, where the location of

supplier and place of supply:

Within same

State

Within same Union

Territory

The following shall not be treated as intra state

supply• supply of goods to or by a Special Economic Zone

developer or a Special Economic Zone unit;

• goods imported into the territory of India till they cross

the customs frontiers of India; or

• supplies made to a tourist referred to in section 15.04.04.2020 © GST & INDIRECT TAXES COMMITTEE, ICAI 11


Section 8 of IGST- Intra state Supply of Services

Subject to the provisions of section 12, where the

location of supplier and place of supply:

Within same

State

Within same Union

Territory

However supply of services to or by an SEZ shall

not be Intra state

Banglore

SEZ

Intra

state


Issues w.r.t Hotel services to SEZ

Hotel - Mumbai Company in

SEZLocation of Supplier

POS u/s 12

Intra state

Inter state as per section 7 (5)(b)

Whether Intra state or Inter

state?

Supply to

employees


Advance ruling no. AAR KAR ADRG 2/2018

Facts of the case

M/s Gogte Infrasturcture Development Corporation Ltd, is engaged in hotel

accommodation and restaurant services. They are providing services to the

employees & guests of some of the units in SEZ, Belgavi, in addition to the

regular customers. They are charging SGST & CGST at the applicable rates.

The SEZ units contended that the services are being supplied / rendered to

SEZ units only and hence rate of GST is NIL as per provisions of section

16(1) of IGST Act’2017. Therefore the applicant filed an application seeking

advance ruling on : “Whether the Hotel Accommodation & Restaurant

services provided by them, within the premises of the Hotel, to the

employees & guests of SEZ units, be treated as supply of goods &

services to SEZ units in Karnataka or not ?”


1. On reading section 16(1)(b) with rule 46 of CGST Rules

2017, it is clearly evident that the supplies of goods or

services or both towards the authorised operations only

shall be treated as Supplies to SEZ Developer / SEZ Unit.

2. For Hotel accommodation and restaurant services POS is

location of Hotel and place where there is Performance of

services respectively.

3. Therefore the services rendered by the applicant are

neither the part of authorised operations nor consumed

inside the SEZ and hence cannot be said to have been

‘imported or procured’ into SEZ Unit/Developer.

4. Hence in the instant case, the supply is intra state supply.

Ruling


However the following issues still persists after AAR

Inter state supply

Further as per section 8(1)(i), Supply of

services to or by a SEZ or a SEZ developer

Intra state supply

Shall not be

As per section 7(5)(b) Supply of goods or services or both to or by a Special Economic

Zone developer or a Special Economic Zone unit; or by a Special

Economic Zone developer or a Special Economic Zone unit; or

(‘c) in the taxable territory, not being an intra-State supply and not

covered elsewhere in this section

Section 7 and 8 of IGST does not

consider POS and LOS. However there

is no reference of these sections in

AAR

Circular No. 48/22/2018-GST


It is an established principle of interpretation of statutes

that in case of an apparent conflict between two

provisions, the specific provision shall prevail over the

general provision.

Section 7(5)(b) of the IGST Act is a specific provision

relating to supplies of goods or services or both made to a

SEZ developer or a SEZ unit, which states that such

supplies shall be treated as inter-State supplies.

clarified that services of short term accommodation,

conferencing, banqueting etc., provided to a SEZ developer

or a SEZ unit shall be treated as an inter-State supply

Examples of Intra State Supplies


POS u/s 10/12


POS u/s 10/12


Section 9 of IGST- Intra state Supply

• Location of supplier or

• POS

Location of supplier or POS shall be the coastal state or UT nearest to the baseline


Off shore Projects

Mumbai-off shore project Supply of Goods /

Services

Location of SupplierPOS

Nearest

coast as

per Sec 9

of IGST

Mumbai

Inter – state supply



Supply of

services

POS as

per sec

15 Be

yo

nd

12

nm What shall be the

POS?

Issue due to definition of Territorial waters

Territorial waters refers to a distance of 12 nm from the baseline of a coastal state

Need for determining place of supply (FAQ)

• The basic principle of GST is that

• it should effectively tax the consumption of such supplies at the destination thereof or

• as the case may at the point of consumption

• So place of supply provision determine the place i.e. taxable jurisdiction where the tax should reach


Recipient of Supply of Goods and /or Services 2(93)

Consideration is payable

Person liableto pay

consideration

Consideration is not payable

For supply of Goods

to whom the goods are delivered / made

available/ possession / use goods

For Supply of Service

To whom Service is rendered


Recipient shall include agent

Why Place of Supply is different for goods and Services


Goods being tangible do not pose any significant

problems for determination of their place of consumption

Services being intangible pose problems w.r.t

determination of place of supply

Reason for problem in determining POS for Services


• The manner of delivery of service could be altered easily

• Service provider, service receiver and the service provided may not be ascertainable or may easily be suppressed as nothing tangible moves and there would hardly be a trail

• No fixed location of Service Provide or receiver is require

• Services are continuously evolving and would thus continue to pose newer challenges- online transaction

• Sometime the same element may flow to more than one location

The manner of delivery of service could

be altered easily

Post paid to prepaid , billing address

Onsite or offsite R&M of Software

Now Banking may not require customer to visit bank


Element may flow in

different state

Interstate

Film distribution of multistate

Delhi metro in NCR

Season ticket

Place of Supply of goods other than export and Import


Where the supply involves movement of

goods

Whether by the supplier or the recipient or by

any other person

Location of the goods at the time at which

the movement of goods terminates for

delivery to the recipient.

Where the goods are delivered by the

supplier to a recipient or any other person

On the direction of a third person, whether acting as an agent or otherwise, deemed that said 3rd person

has received the goods

place of supply of such goods shall be the principal place of business of such

person

Supply does not involve movement of

goods

Whether by the supplier or the

recipient

Location of such goods at the time of the delivery to

the recipient

Place of Supply of goods other than export and Import


Goods are assembled or

installed at site

The place of supply shall be

Place of such installation or

assembly

Goods are supplied on board

a conveyance

Such as a vessel, an aircraft, a train

or a motor vehicle

Location at which such goods are taken on board

Place of supply of goods cannot be

determined

To be determined by law made by the Parliament

With the recommendation

of the GST Council

Location of Service Provider

Location of Service Receiver

Place of Performance

Place of Consumption

Place/ person to which benefit actually flown

Element involved to determine POS in case of Services



location of supplier

location of recipient

Section 12

Place of supply

of services

where the

location of

supplier service

and the location

of the recipient

of service is in

India

Supply

Place of supply of services where the location of supplier service or the

location of the recipient of service is outside India






Supply of Services

Supply of Services

Section 13

Place of Supply of service (Generally)

service receiver is registered?

Yes

Location of Service

Receiver

No

Address record of recipient exist?

Yes


No

Location of Supplier of Service


Sec 12(2)&(3)

Place of supply of service (Generally)

Is location of service receiver is available?

Yes


No

Location of Service Provider

© GST & INDIRECT TAXES COMMITTEE, ICAI04.04.2020 34

Sec 13(2)


Sec 12(3)

Location of immovable property or boat or vessel or intended

location

Services directly relating to

Immovable property inclcoverage of service providers

providing the following services in relation to such

immovable property

Granting right to use immovable property

Services for carrying out or co-ordination of construction work

architects and interior decorators

surveyor, engineer or experts or estate agents

Lodging accommodation by a hotel, etc. incl house boat, vessel

Accommodation in any imm. Prop. For any marriage or function etc. incl services provided i.r.t. such function at such property

Any services ancillary to the services referred above

Incase of location of immovable property is

outside India POS is location of recipient

Goods Delivered/ Installed at Site

04.04.2020 36

Contractor

(Reg: Umargam, GJ)Construction Site

(Dahanu, MH)

RMC Vendor

(Ghodbunder,

MH)

Deliver AtBill To

Which GST is leviable –

IGST/CGST/SGST

© GST & INDIRECT TAXES COMMITTEE, ICAI

Tour Operator

© GST & INDIRECT TAXES COMMITTEE, ICAI 37

Place of Supply

Location of Hotel – NO ITC

Customer

State C

Place of Supply

Location of Customer

State A

State B

State AState BState A

Customer

State C

Place of Supply

Location of Hotel

ITC available to

State A operator

Place of

Supply

State BPlace of

Supply

Location

of Customer

04.04.2020

Services directly relating to Immovable property

Location/ Intended location of Immovable property

Inclusive Coverage of service providers providing the following services in relation to such immovable property

Hotel accommodation by a hotel, etc

Granting right to use immovable property

Services for carrying out or co-ordination of construction work

Services by architects and interior decorators

Services by Auctioneer or experts and estate agents


Sec 13(4)

POS for Cruise

Accommodation on Cruise

Indian Cruise Line

Indian Passenger

POS Location of Cruise

Foreign Passenger

POS Location of Performance of

Service

Foreign Cruise Line

Indian Passenger

POS Location of Performance of

Service

Foreign Passenger

Non Taxable


Personal Services

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.


Sec 12(4)

Performance based services

Shall be the location of actual performance of service in case

Services requiring physical presence of goods

Made physically available by the recipient of service

To the service provider in order to provide the service*

#

Services provided to an individual who is recipient of service/ person

representing the SR

in the physical presence of the service receiver or a person

acting on behalf of the receiver

With the SP for the provision of service


Sec 13(3)

Place of supply of performance based services

*remote location by electronic means, place of provision shall be the location of goods at the time of provisions of such service

# this clause shall not apply in the case of a service provided in respect of goods that are temporarily imported into India for repairs or other treatment or process and are exported after the repairs, treatment or process without being put to any use in the taxable territory, other than that which is required for such repair, treatment or process


Goods Imported for Job Work, etc.

Repair Work Vs Job WorkWould include

• Any repair work

• Undertaken by a person

• on goods

• belonging to another registered or unregistered person

Means

• any treatment or process

• undertaken by a person

• on goods

• belonging to another registered person


Training and performance appraisal


Yes


No

Location where services are actually

performed.


Sec 12(5)


Services in relation to Admission to events/park

Location of event, park etc shall be place of supply of service in respect of following services

Admission to

Cultural event

Artistic event

Sporting event

Scientific event

Educational event

Entertainment event

Amusement park

Any other place

Any other ancillary services

Sec 12(6)


Services in relation to events

Location of event shall be place of supply of service in respect of following services

Admission or organisation to

Cultural event

Artistic event

Sporting event

Scientific event

Educational event

Entertainment event

Celebration

Conference

Fair

Exhibition

Any other ancillary services


Organisation of events

Cultural event

Artistic event

Sporting event

Scientific event

Educational event

Entertainment event

Celebration

Conference

Fair

Exhibition

Any other ancillary services, sponsorship of such events

SR is registered person, location of such person

SR is unregistered

person, place of event.

If event is held outside India POS is location of recipient

Service supplied at more than 1 location including a location in

taxable territory

Gujarat

25%

London

75%

Place of supply shall be Gujarat© GST & INDIRECT TAXES COMMITTEE, ICAI04.04.2020 48

Sec 13(6)

Service supplied in more than one State or UT

Place of supply of service

In the proportion as prescribed in the

agreement

If not given in agreement as may be

prescribed in this behalf


Sec 13(7)

Location of Supplier of Service

Service supplied by a Banking Company or a Financial Institution or a NBFC to account holders

Intermediary

Services consisting of hiring of all means transport upto period of 1 month


Account means an account which bears an interest to the depositor& includes NRE and NRO account

Intermediary means a broker, an agent or any other person, bywhatever name called, who arranges or facilitates a provision of aservice (hereinafter called the ‘main’ service) or a supply of goods ,between two or more persons, but does not include a person whoprovides the main service or supplies the goods on his account.

Sec 13(8)

Intermediary


Service Provider (Domestic)

Facilitation Services Principal (Domestic) POSTaxable

Sec 12(2)


Own Account Marketing, promotion

Principal (Domestic) POSTaxable

Sec 12(2)


Principal (International)

POSTaxable

Sec 13(8)

Service Provider (International)

Facilitation Services Principal (Domestic) POSNon

Taxable Sec 13(8)


Principal (International)

POSExport

Sec 13(2)

Facilitation Services

Own Account Marketing, promotion

GoDaddy (AAR)

Place of Supply including by mail or courier

Destination of Goods

Outside India

Destination of the Goods (w.e.f. 01st February, 2019)

Within India

Goods Transportation Services


Registered Person

UnregisteredPerson

Location of the registered

person

Location at which goods are handed over for

their transportation

Place of supply

Transportation of goods other than by mail or

courier

Place of destination of goods

Goods Transportation Services


Sec 13(9)

Place of supply for passenger transportation


Yes


No

place where the passenger embarks on the conveyance for a continuous journey


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 as

per general rule

the return

journey shall

be treated as

a separate

journey

2(29) continuous journey

Means a journey for which a single or more than oneticket or invoice is issued at the same time, either by asingle supplier of service or through an agent acting onbehalf of more than one supplier of service, and whichinvolves no stop over between any of the legs of thejourney for which one or more separate tickets or invoicesare issued;

Explanation.- For the purposes of this clause, ‘stopover’means a place where a passenger can disembark either totransfer to another conveyance or break his journey for acertain period in order to resume it at a later point oftime.


Passenger transportation Service

The place of supply in respect of a passengertransportation service shall be the place where thepassenger embarks on the conveyance for acontinuous journey.


Sec 13(10)

Services provided on board a conveyance

Place of provision of services provided on board a conveyance such as Vessel aircraft, train ormotor vehicle

shall be the first scheduled point of departure of that conveyance for the journey


Sec 13(10)

Sec 13(11)

Telecommunication ServicesThe place of supply of telecommunication services incl data

transfer, broadcasting, cable and direct to home television services

Fixed telecommunicati

on line, leased circuits, internet

leased circuit, cable or dish

antenna

Location of installation

Mobile connection and

internet provided on

post-paid basis

Billing address

Mobile connection, Internet or DTH

provided on pre-payment

Add. of selling agent, or re-seller or

distributor as per the record of the supplier

Location where such pre-payment is

received or such vouchers are sold

Payment through E mode add. Of the recipient on

record

Case not covered in (b)

and (c)

Add. of the recipient as

per record of supplier

Add. Not available



Sec 12(11)


Place of supply for Banking and other Financial Services including Stock Broking

Address record of recipient exist?

Yes


No

Location of Service supplier

S.2(17):Online Information And Database Access Or Retrieval Services

Online Information [OIDAR]

• means

• services whose delivery is mediated by

• information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and

• involving minimal human intervention, and impossible to ensure in the absence of information technology and


• includes electronic services such as,-

advertising on the internet

providing cloud services

provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet

providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network

online supplies of digital content (movies, television shows, music, etc.)

digital data storage; and

online gaming


OIDARContinued…..

Any 2 of the following in Taxable territory

location of address presented

Cr card / Dr card / smart card or any other card by which payment is settle

billing address

IP address of device used

Bank account from payment is settle

SIM card used

Location of Land line through which service is used


Loca

tio

n o

f Se

rvic

e

Re

cip

ien

t 1

3(1

2)

Notify POS of any description of service and circumstances

POS shall be

effective use and

enjoyment

Prevent double

taxation

Non taxation

Uniform application

of rules


Sec 13(13)

Supply of OIDAR by person in Non Taxable territory to Non

taxable person


Supplying OIDAR Service

Non taxable online

recipient

Person Liable to pay

IGST

Sec 14

Non-taxable online recipient 2(16)• means any Government, local authority, governmental

authority, an individual or any other person not registered and • receiving online information and database access or retrieval

services • in relation to any purpose other than commerce, industry or any

other business or profession, • located in taxable territory.• Governmental authority means an authority or a board or any

other body,––(i) set up by an Act of Parliament or a State Legislature; or(ii) established by any Government, with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution


Person liable to pay IGST

Supplier to take Single

registration under Simplified

Registration Scheme

Representative in India for any

purpose

Such representative

Appoint a person to pay tax



Non taxable online

recipient

Person Liable to pay

IGST

Intermediary arranges

or facilitates the supply

Deemed Recipien

t

Except

a. the invoice or customer’s bill or receipt issued or made availableby such intermediary taking part in the supply clearly identifies theservice in question and its supplier in non-taxable territory

b. the intermediary involved in the supply does not authorise thecharge to the customer or take part in its charge which is that theintermediary neither collects or processes payment in any mannernor is responsible for the payment between the non-taxableonline recipient and the supplier of such services

c. the intermediary involved in the supply does not authorisedelivery; and

d. the general terms and conditions of the supply are not set by theintermediary involved in the supply but by the supplier of services.


Opinions or views

are like wrist

watches.

Every watch shows

different time from

others.

But every one

believes that their

time is right!

GST & Indirect Taxes Committee The Institute of Chartered Accountants of India [email protected] ;https://idtc.icai.org/;https://icai.org/

mailto:[email protected]

https://idtc.icai.org/

https://icai.org/

Supply of Goods involve movements

Place of Supply of Goods

State B IGST will be applicable

Termination of movement of goods

State B

Location of goods ready for supply

State A


Difference between place of supply and Address for Delivery

Place of Supply: Means that location

where good or service is deemed to

be supplied as per chapter V of IGST

Act

Address for the Delivery : Means

location of shipment of goods ,

it can be different from Place of supply

Example: Mr. A ( Maharashtra ) supplies the good to Mr. B

(Delhi). But on the directions of Mr. B , goods are delivered to

Mr. C (Goa). So in this case Place of supply is Delhi but

address of delivery is Goa.04.04.2020 © GST & INDIRECT TAXES COMMITTEE, ICAI 74

Bill to Shipped to• where the goods are delivered by the supplier

to a recipient or any other person on the direction of a third person,

• whether acting as an agent or otherwise,

• before or during movement of goods,

• either by way of transfer of documents of titleto the goods or otherwise

• it shall be deemed that the said third person has received the goods and

• the place of supply of such goods shall be the principal place of business of such person


• Principal place of business means

• the place of business

• specified as the principal place of business in the certificate of registration


Supplier

• City A

3rd Person /Buyer

• State B

Goods delivered at

• City A

Bill

Movement of Goods

BillABC & Co XYZ & Co

POS POS

3rd Person is unregistered?

Place of Supply of Goods (Goods not require movement)


Location of Goods

Supplier

State A State B

Place of Supply of Goods

BuyerABC & Co

• Sale of Factory

with Machine

and Stock

• Sale of Crane

• Sale of Gold

lying with

custodian

Supply of goods assembled/ installed at site


Place of Supply of Service


B2B

Taxable Recipient

Taxable Supplier

State A State B

Place of Supply of Service

B2C Non Taxable

Recipient Place of Supply of

Service if address of recipient not available Place of Supply of Service

if address available

ABC & Co

Mr. XYZ

faq : it is a destination based tax on consumption of ... · gst law article 246a(1) every state...

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