Place of supply of services under GST regime

In the present scenario, service tax is levied on service which is governed by Chapter V of Finance Act, 1994. It states that Service tax is consumption based tax and for the purpose of determining the place where service has been consumed Place of Provision of Service Rules, 2012 are to be referred.

GST is also destination based tax, hence in case of GST also certain provisions will be made in the Act governing the determination of place where service has been provided. In this article the provisions related to determination of place of supply of services are as per Section 16 of Model GST Act, 2016 which is considered as authentic as it was published on UP Commercial Tax department website. Article will be amended as soon as Final GST Act will be made public.

COMPARISON OF SECTION 16 OF MODEL GST ACT, 2016 WITH PLACE OF PROVISION OF SERVICE RULES, 2012(POPOS)

GENERAL CLAUSE UNDER MODEL GST ACT, 2016

Section 16(2) states that the place of supply of all services, except those services specified in sub-sections (4), (5), (6), (7), (8), (9), (10), (11), (12) and (13), made to a registered person shall be the location of the service receiver.

Section 16(3) states that the place of supply of all services, except those services specified in sub-sections (4), (5), (6), (7), (8), (9), (10), (11), (12) and (13), made to any person other than a registered person shall be the location of the service provider.

PROVISIONS WHICH ARE SAME

Place of provision of Services in relation to Immovable property

a. including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work, or

b. by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called and including a house boat or any other vessel, or

c. by way of accommodation in any immovable property for organizing any marriage or reception or matters related therewith, official, social, cultural, religious or business function including services provided in relation to such function at such property,

In above mentioned services, place of provision shall be location at which the immovable property or boat or vessel is located or intended to be located

Place of provision for above mentioned services is governed by Rule 5 of POPOS and in Model GST Act, section 16(4) contains the provision in this respect.

Place of provision of Services which requires the physical presence of individual and the service provider at the time of performance of services.

The place of supply of restaurant and catering services and services in relation to training, performance appraisal, personal grooming, fitness, beauty treatment, health services including cosmetic and plastic surgery shall be the location where the services are actually performed.

Place of provision for above mentioned services is governed by Rule 4(b) of POPOS and in Model GST Act; section 16(5) contains the provision in this respect.

Place of provision of services relating to events

The place of supply of services provided by way of—

a. admission to a cultural, artistic, sporting, scientific, educational, or entertainment event or amusement park or any other place, or

b. organization of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of service in relation to a conference, fair, exhibition, celebration or similar events, or

c. services ancillary to such admission to or organization of any of the above events or services, or

d. assigning of sponsorship of any of the above events,

Shall be the place where the event is actually held.

Place of provision for above mentioned services is governed by Rule 6 of POPOS and in Model GST Act, section 16(6) contains the provision in this respect.

Place of Provision of Passenger Transportation Service

The place of supply of passenger transportation service shall be the place where the passenger embarks on the conveyance for a continuous journey.

Place of provision for above mentioned services is governed by Rule 11 of POPOS and in Model GST Act, section 16(8) contains the provision in this respect.

Place of Provision of Service provided on board a conveyance

The place of supply of services on board a conveyance such as vessel, aircraft, train or motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.

Place of provision for above mentioned services is governed by Rule 12 of POPOS and in Model GST Act, section 16(9) contains the provision in this respect.

PROVISIONS WHICH ARE MADE DIFFERENT

Place of Provision of Service provided by a Banking company, or a Financial Institution or a Non- Banking Financial company

Rule 9 of POPOS states that for services provided by a Banking company, or a Financial Institution or a Non- Banking Financial company to Account holder, place of provision shall be place of service provider. Services provided to Non-Account holder is be governed by Rule 3 which states that POPOS shall be place of service receiver.

The above service is governed by Section 16(11) of Model GST Act, 2016 which states that the place of supply of banking and other financial services including stock broking services to any person shall be the location of the service receiver on the records of the service provider.

Provided that if the service is not linked to the account of the receiver, the place of supply shall be location of the service provider.

In GST Regime POPOS of services provided to account holders will also be place of service receiver. However there is one exception which is given by proviso in which if service is not linked to the account of receiver than POPOS shall be place of service provider. In my view the proviso covers those services in which the presence of Service receiver not required i.e. services which are generally provided by Banks. Examples of such services will be given for further clearance in the amended article when Final GST Act will be made public.

Place of provision of Goods Transportation Services

Rule 10 of POPOS states that place of provision shall be location of person liable to pay service tax in case of GTA, place of provision for Goods transportation services other than GTA shall be the destination of goods. However in present scenario place of provision of courier service is governed by Rule 4 which states that place of provision of service shall be location where the services are actually performed.

As per Section 16(7) of Model GST Act, 2016; the place of supply of services by way of transportation of goods, including by mail or courier to,

a. A registered person, shall be the location of such service receiver;

b. A person other than a registered person shall be the location at which such goods are handed over for their transportation.

PROVISIONS WHICH WERE EARLIER COVERED BY GENERAL CLAUSE NOW A SPECIFIC CLAUSE CREATED

Place of Provision of telecommunication services

As per Section 16(10) of Model GST Act, 2016:

The place of supply of telecommunication services including data transfer, broadcasting, and cable and direct to home television services to any person shall—

1. in case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services;
2. in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of billing address of the service receiver on record of the service provider;
3. In cases where mobile connection for telecommunication and internet service are provided on pre-payment through a voucher or any other means, be the location where such pre-payment is received or such vouchers are sold.

Provided that if such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the service receiver on record of the service provider shall be the place of supply of such service.

Place of Provision of insurance services

As per Section 16(12) of Model GST Act, 2016:

The place of supply of insurance services shall:

1. to a registered person, be the location of the service receiver; and
2. To a person other than a registered person, be the location of the service receiver on the records of the service provider.

Provided that for all general insurance services related to an immovable property, the place of supply of services shall be the location of the property.

Place of Provision of advertisement services

As per Section 16(13) of Model GST Act, 2016:

The place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for identifiable States, shall be taken as located in each of such States and the value of such supplies specific to each State shall be in proportion to amount attributable to service provided by way of dissemination in the respective States as may be 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 reasonable basis as may be prescribed in this behalf.

PROVISIONS WHICH WERE COVERED BY SPECIFIC RULES BUT NO PROVISION IS CREATED IN MODEL GST ACT, 2016

Place of provision of performance based services (in respect of goods)

As per Rule 4(a) of POPOS, place of provision of Services in respect of goods that are required to be made physically available by the service recipient to the service provider, or to a person acting on behalf of service provider, for the provision of services shall be location where the services are actually performed.

Under Model GST Act, 2016 no specific clause is created for determining place of supply of such service hence the same shall be covered by general clause of Section 16(2) or 16(3).

Place of provision of services provided at more than one location

Rule 7 is applicable where service in question is covered under rule 4, 5 and 6 and is provided at more than one location, including a location in taxable territory. In such cases, the place of provision of services shall be the location of taxable territory where the greatest proportion of service is provided. This is applicable even if a part of service is rendered in taxable territory. Service tax would be payable on the entire value of service provided.

Under Model GST Act, 2016 no such provision is created however explanation has been added to Section 16(4), 16(6) to determine value of service provided in different states.

Explanation added to 16(4) is: Where the immovable property or boat or vessel is located in more than one State, the supply of service shall be treated as made in each of the States 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 reasonable basis as may be prescribed in this behalf.

Explanation added to 16(6) is: Where the event is held in more than one State 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 the each of the States in proportion to the value of services so provided in each State as ascertained from the terms of the contract or agreement entered into in this regard or, in absence of such contract or agreement, on such other reasonable basis as may be prescribed in this behalf.

Place of provision of services where provider and recipient are located in taxable territory

The place of provision of service would be the location of service recipient where service recipient and provider both are located in taxable territory.

This rule will override rule 3, 4, 5 and 6. Since if place of provision of a service falls under both rule 3,4,5 or 6 and rule 8, then rule 8 shall apply due to the application of rule 14. Rule 8 will not override rule 9, 10, 11 or 12.

Under Model GST Act, 2016 no provision has been created for determining place of supply of such service.

Place of provision of online information and database access or retrieval services

Rule 9 of POPOS states that for above mentioned service, place of provision shall be Place of service provider.

Under Model GST Act, 2016 no specific clause is created for determining place of supply of such service hence the same shall be covered by general clause of Section 16(2) or 16(3).

Place of provision of Intermediary services

Rule 9 of POPOS states that for above mentioned service, place of provision shall be Place of service provider.

Under Model GST Act, 2016 no specific clause is created for determining place of supply of such service hence the same shall be covered by general clause of Section 16(2) or 16(3).

Place of provision of Services consisting of hiring of means of transport

Rule 9 of POPOS states that if means of transport other than aircraft and vessel are hired up to 1 month, place of provision shall be Place of service provider; else place of provision shall be place of service receiver as per Rule 3.

Under Model GST Act, 2016 no specific clause is created for determining place of supply of such service hence the same shall be covered by general clause of Section 16(2) or 16(3).

Author is a CA Final Student from Delhi and can be reached at jat.grover44@gmail.com