Place of supply of service.

This query is : Resolved

Hardik Makhecha (Querist)
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10 April 2018 A tour operator service provider registered and located in Gujarat,India.

It provides tour operator service to a person visiting India from Singapore being non registered in India.
He arrives India for some project work and this tour operator arranges and manages all concern like, booking of his flight schedule, cab booking, hotel booking, restaurant, and any single rupee he spend in India is managed and planned by tour operator.

Moreover, this tour operator also makes payment to all hotels and taxi service provider on behalf of that person and ultimately raise a bill including all those payments and adding his % of charges for this service. Further, GST is charged on total amount including payment made to others + his charges @ 5% without ITC.

Issue is:

What will be the place of supply of service ?

1. Is it that, a person consuming service is not registered in India neither it have any address in India than Place of supply will be supplier of service and CGST/SGST will be charged
OR
2. Is it that place of supply of service will be the place where service is consumed i.e. IGST to be charged.

It says without going that the foreign party makes payment of bill of tour operator in INR and not taking any ITC on it.

Kindly share your opinion in this regard.

Thank you

Udaya Chandran

Udaya Chandran (Expert)
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10 April 2018 It is intermediary service, so the place of supply is the location of service provider.
The person acting as on agent need not to charge GST on the supplies incurred by the actual recipient.

Hardik Makhecha

Hardik Makhecha (Querist)
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10 April 2018 Exactly. I referred various books and felt that this tour operator being an agent shall be considered as intermediary service. But I doubt because here none of the people have any agreement as P to A service.

[ Actually, I found the following text in one of the famous book :

Tour Package:-
Here total booking is done by the tour operator and the total fees charged shall
include his margin.So the Tour Operator become the service provider and in turn, he receives services
from various other counterparts like Airline Companies, Hotel, Local Taxi Operators, Restaurants,
Embassy issuing visas.

Pure Agent Tour Operator:- The tour operator only facilitates the transaction and helps the traveller to
identify various suppliers as per their requirements and arrange for its booking. Payment flow goes
straight away from actual traveler to end service provider and tour operator only charges for its
service portion from the traveler. ]

In this case, service recipient do not pay directly to end service provider, if it still is considered as an intermediary??

And the person acting as an agent is paying every bill for every service consumed by an actual recipient which is then reimbursed by an actual recipient to an agent along with the commission of agent. If this is incorrect ??

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Udaya Chandran

Udaya Chandran (Expert)
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11 April 2018 If you raise an invoice including all the services provided and charge GST on it, then you will not come under pure agent concept.
Even if the service recipient don't pay directly to end service provider, agent can be a pure agent. Only that he should raise an separate invoice and should not hold any title right on the services or goods. Amount can be reimbursed by pure agent.

Hardik Makhecha

Hardik Makhecha (Querist)
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11 April 2018 Actually invoice is not only raised by adding GST, rather tour operator's own profit (%of commission or service charge) is added and thanGST is charged on total amount.

Suppose, All services are billed (Hotel+Cab+Air) by actual service provider for 1,00,000/-
Agent pays this 100000 to corresponding person on behalf of actual recepient.

Later he raise an invoice like,
100000 + 10000 (10% charges of agent) = 1,10,000/-
Add : GST on 1,10,000 (say5%) = 5500
Total amount of invoice = 1,15,500/-

Here agent charges amount over and above what he paid. Pure agent concept does not allow mark up and requires that agent receive only amount paid to actual service provider.

That's why its a confusion.

Ultimately if it is a pure agent - Place of Supply will be Location of Service provider - To charge CGST/SGST &
If it is not a pure agent(intermediary) - It will be general rule interstate supply - To charge IGST.

And if he raise a seperate invoice for his charges than GST liability only on that portion and other will be reimbursement only..?

Udaya Chandran

Udaya Chandran (Expert)
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11 April 2018 Since he is not covered under pure agent concept (because he included the amount paid on behalf of his client and charged GST on it), the place of supply should be determined under normal conditions.

As per my opinion, the place of supply is the place where the supplier is located, then CGST & SGST will apply.