IGST Section 13 — Place of supply of services where location of supplier or location of recipient is outs

Section 13 of the IGST Act, 2017, focuses on determining the place of supply (PoS) for services when either the service provider (supplier) or the recipient is located outside India. This is crucial for figuring out whether IGST applies and to whom the tax revenue should accrue.

This section applies specifically when cross-border services are involved. This means at least one party involved in the service transaction, either the supplier or the recipient, must be located outside of India. The general rule is that the place of supply is the location of the recipient of the service. This means that if an Indian company receives services from a foreign company, the place of supply is India. However, if a foreign company receives services from an Indian company, the place of supply is outside India, and IGST may not apply.

Here's a breakdown of key conditions and exceptions:

• General Rule: The place of supply is the location of the recipient of services.
• Recipient's Location Unavailable: If the recipient's location cannot be determined in the ordinary course of business, then the place of supply defaults to the location of the supplier. For example, if an overseas client orders a digital service from an Indian company but doesn't provide a billing address, the PoS becomes the Indian supplier's location.
• Specific Service Categories (Location of Actual Performance): For certain services, the place of supply is where the services are actually performed:
  • Services on goods requiring the recipient to physically make them available to the supplier for the service. Example: An Indian company sends a machine to Germany for specialized repair. The place of supply for the repair service is Germany.
  • Services requiring the physical presence of the recipient (or someone acting on their behalf). Example: An Indian citizen travels to Thailand for cosmetic surgery. The place of supply for the surgery is Thailand.
• Immovable Property: Services directly related to immovable property (land or buildings) are taxed where the property is located. Example: An Indian architect designs a hotel to be built in Dubai. The place of supply is Dubai.
• Events: Services related to events like cultural, artistic, sporting, or educational events are taxed where the event is held. Example: A French company organizes a music festival in Mumbai. The place of supply is Mumbai. If such event takes place in more than one state, the place of supply will be taxable territory and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.
• Banking, Financial Services, and Intermediary Services: These services are deemed to be supplied from the location of the supplier. Example: If a UK company uses an Indian broker to facilitate a share trade, the intermediary service is deemed supplied in India. If a Indian bank opens account for a person staying in USA, place of supply is the location of the supplier in india.
• Passenger Transportation: The place of supply is where the passenger embarks on the conveyance for a continuous journey.
• Onboard Services: Services provided on board a conveyance (like a flight) are taxed at the first scheduled point of departure.
• Online Information and Database Access or Retrieval (OIDAR): The place of supply is the location of the recipient. A recipient is deemed to be in the taxable territory (India) if any two of these conditions are met: the location of address presented by the recipient of services through internet is in the taxable territory; 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; the billing address of the recipient of services is in the taxable territory; the internet protocol address of the device used by the recipient of services is in the taxable territory; the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory; the country code of the subscriber identity module card used by the recipient of services is in the taxable territory; the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

Important Amendment: The amendment in 2019 relating to services on goods temporarily imported into India for repairs or treatment clarifies that if goods are imported for repairs or any other treatment and re-exported without any other use in India, then clause (a) of sub section (3) will not apply and IGST will not be applicable on repair and treatment services.

Practical Examples:

• Indian Software Company Providing Services to a US Client: The place of supply is the US (location of the recipient). If the Indian company has a GST registration, it would likely treat the supply as an export and zero-rated supply, allowing it to claim a refund of input tax credit.
• Foreign Architect Designing a House in India: The place of supply is India (location of the immovable property). The foreign architect may need to register for GST in India to pay tax on the services.

Understanding Section 13 is essential for businesses involved in cross-border transactions to correctly determine their GST obligations and ensure compliance. Misinterpreting these rules can lead to incorrect tax payments, penalties, and legal issues.