How is the place of supply determined for services?

Under the Goods and Services Tax (GST) regime, the place of supply for services is crucial for determining whether the supply is intra-state or inter-state, which ultimately dictates whether CGST + SGST or IGST is applicable. The place of supply for services is governed by the Integrated Goods and Services Tax (IGST) Act, 2017 and specific provisions in the CGST Act, 2017.

Provisions Related to Place of Supply for Services

The place of supply for services is defined primarily in Section 12 of the IGST Act, 2017, which provides the general rules for determining the place of supply for different types of services.

1. Section 12 of IGST Act, 2017 – Place of Supply of Services

Section 12(1) provides a general rule that the place of services is the location of the recipient of the service. This means that if the service recipient is located in a different state from the service provider, the supply is considered inter-state, and IGST applies.

2. Specific Rules for Different Types of Services (Section 12)

The IGST Act further elaborates on the supply for various types of services through specific rules. Here are the key ones:

1. Services Involving Immovable Property (Section 12(3)):

The place of supply is the location of the immovable property. This applies to services like:
- Construction of an immovable property.
- Real estate services.
- Architectural services related to immovable property.
Example: If a contractor in Delhi provides construction services to a customer in Mumbai, and the property being constructed is in Mumbai, the place of supply is Mumbai, and the transaction will attract CGST + SGST (if both the service provider and recipient are in the same state).

2. Services Related to Events (Section 12(4)):

The place of supply is the location of the event. This rule applies to services such as organizing conferences, exhibitions, concerts, or any event-related services.Example: If a company provides event management services for a seminar held in Bangalore, the place of supply is Bangalore.

3. Transport of Goods (Section 12(5)):

For the transportation of goods, the place of supply is determined based on where the goods are delivered to the recipient.Example: If goods are transported from Chennai to Pune, the place of supply would be Pune.

4. Passenger Transport Services (Section 12(6)):

The place of supply for passenger transport services is the place of embarkation (i.e., where the passenger starts their journey).Example: If a passenger travels from Delhi to Mumbai, the place of supply for the transportation service is Delhi.

5. Services of Online Information and Database Access or Retrieval (Section 12(7)):

The place of supply for services like online information, database access, or digital services is the location of the recipient, if the recipient is a business. If the recipient is a non-business customer (like an individual), the place of supply is the location of the supplier.Example: A subscription service for a digital magazine will have the place of supply based on whether the subscriber is a business or an individual.

6. Other Services (Section 12(8)):

For services that do not fall under any of the specific categories mentioned above, the place of supply will be the location of the recipient of the service.Example: If a marketing agency in Chennai provides services to a business in Bangalore, the place is Bangalore, and the transaction will attract IGST.

3. Special Provisions for B2B and B2C Transactions:

B2B (Business to Business): For B2B transactions, the place of supply is generally the location of the recipient.
B2C (Business to Consumer): For B2C transactions, the place of supply is usually the location of the supplier, except for certain specified services, like transportation and immovable property-related services.

Acts in the Indian Constitution Relevant to Place of Supply for Services

Constitution (One Hundred and First Amendment) Act, 2016:
- This amendment enabled the introduction of GST in India and laid the framework for GST’s administration, including the taxation on services. The amendment grants powers to both the Union Government and State Governments to levy taxes on the supply of goods and services.
Article 246A:
- This article grants the Union and State Governments the power to legislate and levy taxes on the supply of goods and services.
Article 269A:
- Defines the authority to levy and collect taxes on the supply of goods and services between states, empowering the Union Government to collect IGST on inter-state supplies.
Article 279A:
- This article established the GST Council, which is responsible for making recommendations on various aspects of GST, including the supply for services.

Landmark Cases and Judgments Related to Place of Supply for Services

M/s. Bharti Airtel Limited v. Union of India (2019):
- This case involved the application of GST on telecom services. The ruling clarified that telecommunication services are treated as services relating to immovable property when provided for the installation and maintenance of equipment, and the place of supply is the location of the immovable property.
Jet Airways (India) Ltd. v. Union of India (2020):
- This case focused on the place of supply of passenger services. The court ruled that for passenger transport services, the place of embarkation (origin of travel) is the correct place of supply, even if the flight travels across multiple states or countries.
M/s. MakeMyTrip India Pvt. Ltd. v. Union of India (2017):
- This case involved determining the place of supply for tourism services provided by travel agencies. The ruling confirmed that the place of supply for tourism services like hotel accommodation, transportation, and sightseeing is the location where the service is provided.
M/s. AAR Ruling on Digital Services (2021):
- In this case, the Authority for Advance Rulings (AAR) clarified that the place of supply for digital content and software services will depend on the location of the recipient, and if the recipient is a business, it will be the location of the recipient. For individuals, it will be the location of the supplier.

Key Takeaways:

The place of supply for services is primarily determined by where the recipient is located (for B2B services).
Specific rules apply to certain types of services, such as those related to immovable property, transportation, online services, and events.
IGST applies for inter-state services, while CGST + SGST applies for intra-state services.
The GST Council plays a crucial role in defining the provisions regarding the place of supply, and various landmark judgments have helped interpret and clarify these provisions for specific services.