Deciphering 'Time of supply & place of supply rules for services under GST'

Introduction:

BJP government had entirely overhauled our indirect taxation system. On the line of Canada and France, India had somewhat introduced a unique and cooperative federalism taxation regime. It was long anticipated as it was in manifest of BJP government which was completely inclined to support the overhaul. Goods and Service Tax (GST) is a simpler version of indirect taxation system, though concepts remain the same. Taxation on commodities is specified in schedule and if the goods fall under the requisite category of schedules then it would be charged accordingly. The biggest change which GST had provided us is with the introduction of destination based tax, though at the onset it was opposed by the manufacturing states such as Tamil Nadu, Karnataka but now it is an entirely consumers based tax, i.e. destination based tax means where the goods is supplied to consumer it shall be taxed in that State. To recommend any further amendments, a GST Council had been introduced which is a constitutional body. Further, GST is divided into three parts, that is SGST (State Goods & Services Tax), CGST (Central Goods & service tax) both of them would be used for intra state tax regime and lastly IGST (Integrated Goods & Service tax) which will govern interstate tax regime i.e. would be accumulation of SGST and CGST which is separately accumulated for intra State taxation. This Assignment would be confined to analysis of Time of Supply & place of Supply rules for Service under GST.

Provisions of Time of Supply and Place of Supply

Place of Supply of Service- Services itself had been defined under CGST[1] to mean  anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. What can be inferred from  the above definition is service shall be considered money equivalent. Whereas place of Supply had been explained in CGST[2] and IGST[3]as:

• Where a supply is received at place of business for which the registration has been obtained, the location of such place of business;
• Where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
• 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 supply;
• And if none of the above is present than, then the usual place of residence of recipient.

IGST Act provides applicability of section 12 (1), if location of supplier and recipient is in India.[4]Further specifically from section 12 (3) to 12 (14), it provides for specific levy on subjects such as-:

Immovable property[5] - Any service ancillary or directly in relation to an immovable property shall be shall be the location at which the immovable property or boat or vessel is located or interest to be located.  If the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient. Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made in each of the respective State or Union territories, 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 basis as may be prescribed.

Restaurant[6]- place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.

Training and performance appraisal[7]- It shall be the location of such person and to a person other than a registered person, it shall be the location where the services are actually performed.

Admission to a cultural, artistic, sporting etc[8]- services provided by way of admission to a cultural, artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other places is located.

Where the event is held in more than one State or Union territory 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 each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.[9]

Transportation of goods[10]- place of supply of services for transportation of goods, including mail or courier to a registered person shall be the location of each such person; a person other than a registered person, the place of supply shall be the location at which such goods are handed over for their transportation.

Transportation of passengers[11]- place of supply of passenger of transportation service to a registered person shall be the location of such person.  The place of supply for a person other than a registered person shall be the place where the passenger embarks on the conveyance for a continuous journey.

Telecommunications[12]-

• In case of fixed lines, place of supply shall be where it is installed.
• In case of mobile and internet service, billing address of the recipient.
• Pre paid connections through voucher, address of selling or distributor and by any final subscriber , the location where pre payment is received.

Banking and other financial rules[13]- place of supply of banking  and other financial services, including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services, And if it is a service other than aforementioned, then it shall be location of registered person, or if not a registered person, then address on record and location of supplier in all other cases.[14]

Time of Supply of service- Whereas for the time of supply of services, CGST in section 13 provides for the process to be followed in earliest manner[15]-

• if date of invoice issued within prescribed period it will be, date of invoice or date of receipt of payment.
• If date of invoice not within prescribed period, then date of provision of service or the date of receipt of payment.
• If both of these are not applicable, then receipt of service in book of accounts.

If received in excess of amount of 1000 rs, the time of supply shall be reimbursement of same. Further if on reverse charge basis, then book of account of the recipient or date of debit in account and if not this then 60 days from the date of invoice and if not both then it shall be the date on which accounts are entered in books. If not possible by any of this method, then it shall be the date on which periodical return is filed or on the date on which tax is paid.

Analysis of Provisions of Time of Supply and Place of Supply

Reference to the place of supply rules was given in 'Working Paper GST Reforms and Intergovernmental Considerations in India' wherein it was stated that,

'In virtually all countries, VAT is levied on the basis of the destination principle. For this purpose, some countries follow the practice of prescribing a set of rules for defining the place of taxation or place of supply. A supply is taxable in a given jurisdiction only if the supply is considered to take place in that jurisdiction.'

Further the earlier position was cleared by Supreme Court in All-India Federation of Tax Practitioners and ors v. Union of India,[16]wherein it had clarified in reference of service rules 2012 that,

'it is clear that service tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer…'

Service tax is a destination based Tax. Following the basic concept of the destination based tax, therefore the tax would always accrue to the jurisdiction where the services are consumed to which government of India decided to provide India with a single window of tax clearance as there existed more than 100 types of indirect taxes with the same object as clarified by the Supreme Court.

As we all know that Goods and Services Tax is a destination based concept and Destination Based Taxation as the name suggests is the taxation based on destination or consumption of the goods or services.  This principle seeks to tax the goods and services on simple theory that the goods or services should be taxed at the stage where their consumption takes place and the entire revenue relating to the goods or services should accrue in the jurisdiction where they are being ultimately consumed. Thus the first main takeaway for the place of supply rules is revenue accrues to the Jurisdiction where the goods and/or services are consumed. Thus, the key identification is the place of consumption. Further Time of Supply of Service had also been clarified as already mentioned by the author is more of a try to complement the place of supply of service that is again destination based. Further we see, service had been tried to be maintained as money equivalent making it easier to assess the value of taxable services as it is already money equivalent. Thus, embarking a new, simpler era of taxation, to which earlier with the plethora of acts it had been crowded, to which it had been made easier by compressing all indirect taxation laws regarding supply into an integrated code.

• [1] Central Goods and Services Tax Act, No. 12 of 2017, Central Board of Excise and Customs, §2(102).
• [2] Integrated Goods and Service Tax Act, No. 13 of 2017,  Central Board of Excise and Customs, §2(71).
• [3] Integrated Goods and Service Tax Act, No. 13 of 2017,  Central Board of Excise and Customs, §2(14).
• [4] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12(2).
• [5] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12(3).
• [6] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (4).
• [7] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (5).
• [8] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (6).
• [9] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (7).
• [10] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (8).
• [11] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (9).
• [12] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (10).
• [13] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (11).
• [14] Integrated Goods and Service Tax Act, No. 13 of 2017, Central Board of Excise and Customs, §12 (2).
• [15] Central Goods and Services Tax Act, No. 12 of 2017, Central Board of Excise and Customs, §13.
• [16] All-India Federation of Tax Practitioners and ors v. Union of India, (2007) 7 SCC 527.