Possible Mistakes and Issues in Place of supply of Services under GST

The Indian economy is all set for economic overhaul with the implementation of GST which is expected to create a Common National Market and provide a boost to Indian exports. GST, based on the notion “One Nation; One Market; One Tax”, will roll-out from July 1, 2017. GST being the biggest tax reform will be a turning point for the economy and would benefit all stakeholders i.e. the Government, Businessman, and consumers. In this constantly changing scenario, the Institute is proactively supporting the Government by contributing its suggestions on the one hand and disseminating awareness among the members and other stakeholders on the other hand. CAknowledge.in is constantly working to create awareness regarding GST amongst members, stakeholders and public at large. Now check more details for “Possible Mistakes and Issues in Place of supply of Services under GST” from below…

Challenges under Place of supply of Services under GST Regime

S.12(14) of IGST Act: Advertisement

place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for the States or Union territories identified in the contract or agreement

Challenges:

• 1) M/s AAA Ltd., an Advertising agency were appointed by MoH for dissemination of ―Sarva Shiksha Abhiyan for a price of Rs.40 Crores to be placed on electronic media across the nation
• 2) M/s ABD Ltd., a Print media were approached by MoF for a campaign of ―GST Entrollment for a special bulletin in South India for a package of Rs.10 Crore

S.12(13) of IGST Act:Insurance

• (a) to a registered person, be the location of such person;
• (b) to a person other than a registered person, be the location of the recipient of services on the records of the supplier of services

Challenges:

• 1) M/s ABC Ltd., having registered office in Chennai have sought for Insurance coverage of all 10 branches located across India for Rs.100Crore. M/s. NIC Ltd., an Insurance company have offered a premium of Rs.4.2 Crore for entire coverage
• 2) M/s NIC Ltd., an Insurance company has to settle an Insurance claim along with processing charges of Rs.10lakhs to an Unit located in Haryana on behalf of the application filed by the Head Office at Mumbai

S.12(12) of IGST Act: Banking and Other Financial Services

The 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

If the location of recipient of services is not available, the place of supply shall be the location of the supplier of services

Challenges:

• 1) M/s HLU ltd., having Corporate Office in Chennai, seeks for a Working capital loan of Rs.20 Crore [10+10] with a leading MNC Bank Ltd., each of such loan intended for its branches located in Kochi and Hyderabad. MNC Bank Ltd., sanctions the loan and charges processing charges of Rs.20 lakhs
• 2) M/s XYZ Ltd., a Trading company has got spread across entire South India. All the branches have only one Bank Account maintained by Regd. Office at Hyderabad. Bank Processing charges along with applicable taxes towards Bill Discounting, Cheque Dishonour etc., how to deal with under GST

S.12(8) of IGST Act: Transportation of Goods

• (a) a registered person, shall be the location of such person;
• (b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation

Challenges:

• 1) M/s LLP Ltd., Supplier registered in Bengaluru, dispatches a DG Set to its customer located in Hyderabad through a Transport agent on ―to pay‖ basis to the customer
• 2) Branch1 in State1 dispatches the consignment worth Rs.20lakhs to its Branch2 located in State2, through a Transport agency. Booking of Transportation is done by Branch1 and Payment shall be done by Branch2 on receipt of the consignment

S.12(3) of IGST Act: Immovable Property, Accommodation, Boat, Vessel or other similar services

shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located Reference to Rules

Challenges:

• 1. M/s. ABC Ltd., approaches Mr. Z an Interior Decorator for making an uniform structure and colour coding for all the Branches across India. Mr.Z proposes for Rs.10Crore as consultation charges
• 2. Mr.A an owner of Commercial building at Pune, enters into a contract with M/s.BCD Ltd., at Bangalore for renting out such Immovable Property

Place of Supply challenges for Services

S.13(12) of IGST Act: Online information and database access or retrieval services POS shall be the location of the recipient of services [OIDDBAR]

Person receiving the Service shall be deemed to be located in the taxable territory, if any two of the following noncontradictory conditions are satisfied, namely:–

• (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

S.13(8) of IGST Act: POS on the basis of Location of Supplier of Service

• a) Services supplied by a Banking Company, Financial Institution or a NBFC
• b) Intermediary Services
• c) Hiring of Transport including Yacht but excluding aircraft upto a period of one month

Challenges:

• Commission earned by an Intermediary for outbound business
• Services performed by a Foreign branch of a Bank, on behalf of an Inbound branch

S.13(3) of IGST Act:

POS shall be the location where Services are actually performed

• a) Services supplied in Respect of the goods which are physically made available If services are rendered remotely, POS shall be location of goods at the time of supply. Performance based test not applicable for goods temporarily imported into India for repair and are exported after repair without being put to any other use in India
• b) Services supplied to an Individual, which require the physical presence of recipient with the supplier for the supply of service

Challenge:

Services performed by a Registered person in relation to goods exported earlier, on bringing them back to India [post warranty or out of warranty]

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