How to Determine Place Of Supply of Service Under GST

Under the Goods and Services Tax (‘GST’) Law, the taxpayer is liable to pay tax at the time and as per the place of supply. The place of supply is the place of consumption of services. 

Provisions regarding ‘Place of supply’ are explained under the IGST Act. ‘Place of Supply of Goods under GST’ is discussed separately in our article. This article will focus on the place of supply of services in general.

However, there are specific cases/rules for determining the place of supply for services rendered directly in relation to immovable property, transportation of goods, and many more specific services.

Importance of Place of Supply

Let us first understand why an accurate determination of place of supply is important for businesses. The reasons for this are listed below:

• Wrong classification of supply between interstate or intra-state and vice-versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of CGST Act
• Where wrong taxes have been paid on the basis of the wrong classification, a refund will have to be claimed by the taxpayer
• The taxpayer will have to pay the correct tax along with interest for the delay on the basis of revised/correct classification
• Also, correct determination of place of supply will help us in knowing the incidence of tax. As if the place of supply is determined as a place outside India, then tax will not have to be paid on that transaction

Determining The Place Of Supply Of Services

GST is destination-based tax i.e consumption tax, which means tax will be levied where goods and services are consumed and will accrue to that state. Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the ‘’place of supply’’ so determined and the location of the supplier, the respective tax will be levied. 

IGST is levied where the transaction is inter-state, and CGST & SGST are levied where the transaction is intra-state. For understanding the place of supply for services, the following two concepts are very important namely:

• Location of the recipient of services
• Location of the supplier of services

Let’s understand these two concepts in detail as they will form the base for determining the place of supply in case of the supply of services:

Location of the Recipient of Services

Location of the Provider/Supplier of Services

The transactions in terms of supply of services can be broadly categorized as below:

Domestic Transactions

These are the transactions where both the parties i.e the supplier as well as the recipient of service are in India. Domestic transactions can be further categorised as below:

• Inter-State (i.e between two different states)
• Intra-State (i.e within the same state)

General Rule: In general, the place of supply for services will be the location of the service recipient (the recipient needs to be a registered person). 

In cases, where service is provided to an unregistered person, the place of supply will be the:

• Location of the service recipient (if the address is available on record);
• Otherwise, the location of the service provider

International Transactions

These are the transactions where either the service recipient or the provider is outside India. Transactions in which both the recipient as well as a provider are outside India are not covered here.

General Rule: The Place of supply for services treated as international transactions shall be:

• The location of the service recipient
• In the case where the location of the service recipient is not available, the place of supply shall be the location of the supplier.

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