Place of Supply of Services Under GST

Under the Goods and Services Tax (GST) law, tax liability is determined by the place where services are consumed rather than where they are provided. In essence, GST is a destination-based tax, meaning that the state where the service is consumed has the right to levy the tax.

How to Determine the Place of Supply of Services Under GST

Provisions related to the ‘place of supply’ for services are explained under the IGST Act. This article focuses on the general rules for determining the place of supply of services. Specific rules also exist for services related to immovable property, transportation of goods, and other specialized services.

Importance of Determining the Place of Supply

Accurately determining the place of supply is crucial for businesses because:

• Correct Classification: Misclassifying a transaction as interstate instead of intrastate (or vice versa) may cause compliance issues under Section 19 of the IGST Act and Section 70 of the CGST Act.
• Refund Implications: Incorrect classification can lead to overpayment of tax, which later requires a refund claim.
• Tax Liability and Interest: The taxpayer may be liable for the correct tax along with interest for delays based on a revised classification.
• Incidence of Tax: If the place of supply is determined to be outside India, no tax is applicable on that transaction.

Determining the Place of Supply of Services

Since GST is destination-based, the tax accrues where the services are consumed. The applicable taxes are IGST for interstate transactions and CGST plus SGST for intrastate transactions. Two key concepts form the basis for determining the place of supply:

• Location of the Recipient of Services
• Location of the Supplier of Services

1. Location of the Recipient of Services

The following table outlines how to determine the location of the service recipient:

S.No	Case	Location of Recipient of Service
A	Supply received at a registered place of business	Such place of business
B	Supply received at a fixed establishment other than the registered place	Such fixed establishment
C	Supply received at more than one establishment	The establishment most directly concerned with the receipt
D	None of the above applies	Usual place of residence of the recipient

2. Location of the Supplier of Services

The location of the service supplier is determined as follows:

S.No	Case	Location of Supplier of Services
A	Supply made from a registered place of business	Location of that place
B	Supply made from a fixed establishment other than the registered place	Location of that fixed establishment
C	Supply made from more than one establishment	The establishment most directly concerned with the provision
D	None of the above applies	Usual place of residence of the supplier

Categories of Service Transactions

Transactions in the supply of services can be broadly classified into:

• Domestic Transactions: Occur when both the supplier and recipient are in India. These can be further divided into interstate and intrastate transactions. Generally, if the recipient is registered, the place of supply is the recipient’s location.
• International Transactions: Occur when either the service recipient or supplier is located outside India. In such cases, the place of supply is determined by the recipient’s location, or if not available, by the supplier’s location.

By accurately determining the place of supply for services, businesses can ensure proper tax treatment under GST—avoiding errors that could lead to incorrect tax payments, interest charges, or compliance issues.

For any further assistance on GST compliance or to discuss your specific requirements regarding the place of supply of services under GST, please feel free to reach out. DisyTax is here to help you navigate the complexities of GST with confidence and clarity.