How to Determine the Place of Supply of Services

Last updated on July 13th, 2017 at 02:38 pm

In the current tax regime, the provision of a taxable service is subject to service tax.  Service tax is levied by the Central government and is applicable irrespective of whether the provision of service is interstate or intrastate.

However, under GST, the place of supply of service will determine the type of tax applicable on the service. This is based on the concept of GST being a ‘destination based consumption tax’, where tax will accrue to the State where the supply is consumed. Hence, it is important to determine the place of supply of services.

The rules for determining the place of supply of services are different from the rules for determining the place of supply of goods. In case of goods, the movement of goods largely decides the place of supply. Services, being intangible, have no fixed manner of delivery. Also, in certain cases of supply of service, the location of the supplier and/or recipient may not be fixed or even ascertainable.

In this blog, we will discuss how to determine the place of supply of services.

GST is a ‘destination based consumption tax’, where tax will accrue to the State where the supply is consumed.Click To Tweet

When a service is supplied to a registered person

In the current regime, when a taxable service is provided to a registered person within the same state or outside of the state, Service Tax is applicable.

For example: Manish Designers, whose registered place of business is Bhubaneswar, Odisha, provides fashion designing services to Rajesh Apparels, whose registered place of business is Hyderabad, Telangana. Being a taxable service, Service Tax (including Swachh Bharat Cess and Krishi Kalyan Cess) @ 15% will be charged on this transaction.

In the GST regime, the place of supply must be determined to identify the type of GST to be charged. When a taxable service is supplied to a registered person (regular/composition dealer), the registered place of business of the recipient will be the place of supply.

When a taxable service is supplied to a registered person, the registered place of business of the recipient will be the place of supply.Click To Tweet
Supply to a registered person within the same state

When a service is supplied to a registered person within the same state, the taxes applicable are CGST and SGST.

For example: Manish Designers, whose registered place of business is Bhubaneswar, Odisha, supplies fashion designing services to Murali Fashions, a registered apparel manufacturer in Cuttack, Odisha.

Location of supplier: Bhubaneswar, Odisha

Place of supply: Cuttack, Odisha

This is an intra-state supply and the taxes applicable are CGST and SGST.

Intraste supply of services under GST

Supply to a registered person in a different state

When a service is supplied to a registered person in a different state, the tax applicable is IGST.

For example: Manish Designers, whose registered place of business is Bhubaneswar, Odisha, supplies fashion designing services to Rajesh Apparels, whose registered place of business is Hyderabad, Telangana.

Location of supplier: Bhubaneswar, Odisha

Place of supply: Hyderabad, Telangana.

This is an interstate supply, and the tax applicable is IGST.

Services place of supply gst

When a service is supplied to an unregistered person

In the current tax regime, Service Tax is applicable when a service is provided to an unregistered person. There is no distinction in the charge of tax based on whether the recipient is registered or unregistered.

In the GST regime, when a service is supplied to an unregistered person, there can be 2 scenarios:

Scenario 1: The address of the recipient exists in the records of the supplier

Scenario 2: The address of the recipient does not exist in the records of the supplier

Scenario 1: When a service is supplied to an unregistered person whose address exists in the supplier’s records, the place of supply will be the location of the recipient in the supplier’s records.

When a service is supplied to an unregistered person whose address exists in the supplier’s records, the place of supply will be the location of the recipient in the supplier’s recordsClick To Tweet
Supply within the same state

When a service is supplied to an unregistered person whose address in the supplier’s records is within the same state, the taxes applicable are CGST and SGST

For example: Manish Designers, whose registered place of business is Bhubaneswar, Odisha, provides fashion designing services to Ramesh Clothing, an unregistered dealer. In the records of Manish Designers, the address of Ramesh Clothing is in Puri, Odisha.

Location of supplier: Bhubaneswar, Odisha

Place of supply: Puri, Odisha

This is an intrastate supply, and the taxes applicable are CGST and SGST.

GST on services to unregistered person

Supply to a different state

When a service is supplied to an unregistered person whose address in the supplier’s records is in a different state, the tax applicable is IGST.

For example: Manish Designers, whose registered place of business is Bhubaneswar, Odisha, supplies fashion designing services to Lakshmi Apparel, an unregistered dealer. In the records of Manish Designers, the address of Lakshmi Apparel is in Kolkata, West Bengal.

Location of supplier: Bhubaneswar, Odisha

Place of supply: Kolkata, West Bengal

This is an inter-state supply and the tax applicable is IGST.

Example of GST Interstate Supply of Services

Scenario 2: When a service is supplied to an unregistered person whose address does not exist in the supplier’s records, the place of supply will be the location of the supplier

Example: Manish Designers, whose registered place of business is Bhubaneswar, Odisha, provides fashion designing service to a customer, whose address is not available in their records.

Location of Supplier: Bhubaneswar, Odisha

Place of Supply: Bhubaneswar, Odisha

This is an intrastate supply, and the taxes applicable are CGST and SGST.

Supply of services in GST

Note: In GST, a person supplying services is not eligible to register as a composition dealer. However, the GST Council decided in its 11th meeting on 4th March ‘17 that small hotels, restaurants and dhabas with annual turnover less than Rs. 50 Lakhs can register as composition dealers. This is yet to be incorporated in the GST Law.

These are the general rules for determining the place of supply of services. However, specific rules for determining the place of supply of certain services have been laid down. We will be covering these in our upcoming blogs.

Next-in-line

Place of supply of services in relation to an immovable property

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34 Comments

  • We are dealers in Maharashtra state but being very close to Karnataka, all our services are provided by dealers in Karnataka. I use legal and transportation services from Karnataka, which are subject to reverse charge. Both the legal and transport service providers are unregistered. Should I pay IGST under reverse charge? Also, the legal cases are fought in both Maharashtra and Karnataka courts by the lawyers, who reside in Karnataka. Does this change the place of supply ?
    Thanks

  • I could not find “Share your thought” in ‘Bill to Ship’ page hence asking here – As I understand GST stands for single tax window but on “Bill to Ship” page you have given 3 examples for E-1 sale with tax applicable twise in 3rd party transactions————– like ——– 1) Supplier/Maharastra -> IGST -> purchaser/Gujrat -> IGST -> user destination / Karnatka ! 2) Supplier/Maharastra ->CGST+SGST -> purchaser/Maharastra ->IGST -> user destination/ Karnatka ! 3) Supplier/Maharastra ->IGST -> purchaser/ Karnatka -> CGST+SGST -> user destination/ Karnatka ! My question – Is it not a double taxing in all the three cases – 1)– IGST+ IGST ! 2) — (CGST+SGST) + IGST ! 3) IGST + (CGST +SGST) ! Please clarify!! Thanks.

    • In each of these cases, tax will be levied at every stage in the supply chain: first, when original supplier sells to a dealer and later, when the dealer bills to the customer. The dealer can always take input credit of the tax paid to the original supplier. Hence, it will not lead to double taxation. In bill-to ship-to scenario, the main point to note is that in the bill raised by the original supplier, tax has to be charged based on the dealer’s location, not the location where the goods are shipped to.

      • Thank you very much for reply. Please clarify one more thing i.e. at what value the dealer will charge the tax e.g. if the purchase value is Rs. 100.00 [basic 82.00 + 18(Tax)] and if purchase & sale price is same then –
        1.Will dealer has to charge the tax at Rs. 82.00 or Rs. 100.00 !
        2. If it is on Rs.100.00 that means he will be charging 18% extra on Rs.18.00 which he paid as tax.
        3. Is input credit (of tax paid to original supplier) 100% or part of it?

        Request, please clarify.
        Thanks.

  • Service Provider (Registered at Delhi)
    Service Receiver (Registered at UP)

    Provider Providing Services at Receiver’s Site i.e (Uttar Pradesh) !

    Does Provider also needs to registered at Uttar Pradesh ?

  • billing format under GST and Return forms to be uploaded and their due dates be uploaded on tally site for tally users which will help a businessman to work under GST immediately wef 01.07.2017

  • What will be the gst applicable In a scenario 1 where supplier is registered in state Maharashtra and recipient is also registered in state Maharashtra but the goods delivered in Punjab state?
    Scenario 2 where supplier is registered in state Maharashtra and recipient is registered in State Karnataka but the goods delivered in Punjab.

  • Thank you very much for little information about service tax . I am request you to provide me about the service provider details information under GST Act. We are registered customer in your good office . Please issued me any video cd about the GST Rules and Act .and GST Returm Manual (you tube) along with Quotation at the earliest.

  • Would like to have explanation on how taxes to be paid on advance payments collected to be treated. How to arrive at taxable amount in advances collected.

  • We are ship repairers based at chennai. Our customer`s ship comes to chennai and we qill provide our services. Our customers are based at Mumbai, Kolkatta, Vizag. How to determinse gst on this scenario

  • Good presentation. I request to ađd reference of section of GST Law. Pl. Discuss about threefold limit of Rs.20 lacks.Whether it is available to all whose turnover is exceeding Rs 20 lacks.As per my opinion as per section 10 when dealer registered once he is Taxable and no benefit of three
    fold limit. CA.R.B.SHAH.

  • I want to understand the concept of registration for business verticals in GST since I have been provided only one provisional id. Further how and to what effect tally will take care of my GST compliance. When and how will I be able to educate myself on this.

    • If a business has a different business vertical in the same state, the business has an option to take separate registration for each vertical or have a single registration.

  • Thanks for sharing such a useful information regarding GST, i believe everyone is curious to know about the provisions as envisaged under Model GST law. I also believe that the knowledge of proposed GST in advance is a must for everyone, particularly the business communities and tax administrators, to prepare themselves well in time for the biggest indirect tax reforms post independence and to avoid any chaotic situation on the day of its implementation.

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