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determine place of supply

07 May 2019

we are a service provider and providing supply of service in other territory (for example USA) but we raise invoice to a domestic client who is also registered person/body corporate under GST.
do we need to charge IGST and place of supply will be other territory or the client place where it registered?

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4 Replies

Pankaj Rawat (GST Practitioner) (55057 Points)
Replied 08 May 2019

plz clarify the kind of services being provided

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Mohd Nadeem (130 Points)
Replied 09 May 2019

online information like newsletters, or database etc

Pankaj Rawat (GST Practitioner) (55057 Points)
Replied 09 May 2019

I still cant understand that , the newsletter or Database kind of services....but if its provided to USA in their System then Its treated as export Services cannot bill to domestic client .(in term of First proviso to Section 13(3)(a) of IGST Act)

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 10 May 2019

Your service seems to be covered under the definition of "Online Information and Database Access or Retrieval (O.I.D.A.R)" services u/s.13(12) of I.G.S.T Act. Normally, as Mr.Pankaj Rawat mentioned, billing has to be done in the name of U.S.A client. But in some cases to avoid litigation of several acts like F.E.M.A/R.B.I/IT ACT or to mitigate losses on account of Foreign currency fluctuations, most of the companies make payment in India through their sister concerns and reimburse the same through book adjustments. Indeed, some acts may avoids the same but nothing contained in I.G.S.T act bar the same on the basis of following footing.

Explanation to Section 13(12) provides that when any two non-contradictory conditions of the following satisfied, it shall be deemed that service recipient is located in taxable territory viz.,(a) the location of address presented by the recipient of services through internet is in the taxable territory; (b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory; (c) the billing address of the recipient of services is in the taxable territory; (d) the internet protocol address of the device used by the recipient of services
is in the taxable territory; (e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory; (f) the country code of the subscriber identity module card used by the recipient
of services is of taxable territory; (g) the location of the fixed land line through which the service is received by
the recipient is in the taxable territory.

As per sec.13(12), PLACE OF SUPPLY OF O.I.D.A.R SERVICES SHALL BE THE LOCATION OF SERVICE RECIPIENT OF SERVICE. Hence, in your case if any two of the above conditions are satisfied then the location of service recipient is in taxable territory i.e. India, irrespective of the fact that effective use or enjoyment of a service is outside India. As per 2(6), A service is said to be EXPORT OF SERVICE when (i) Supplier of service in India, (ii) Recipient of service outside India (Must be Non-taxable territory), (iii) Place of supply outside India and (iv) Payment received in convertible foreign currency. If either any two conditions mentioned in 13(12)(a) to (g) are satisfied (Place of supply in India) or payment is received in I.N.R then such supply shall be automatically "DISQUALIFIED" as a "EXPORT OF SERVICE". Hence, it is NOT A CASE OF EXPORT OF SERVICE.

And coming to billing issues, If contract for provision of such service is entered into by such sister concern and payment is also made by it then we may assume such services are received by such company in India (Notwithstanding the fact that Effective use or Enjoyment of Service may be outside India as no notification in this regard is issued u/s.13(13))

Hence, you can bill based on state code of G.S.T.I.N of both supplier and receiver. If both state codes same then C.G.S.T + S.G.S.T otherwise I.G.S.T. This opinion may differ on further facts also

SECTION 13(13): In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any descripttion of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.

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