Read this guide by earlyGST to understand the process of determining the place of supply of services under GST.

How to Determine Place of Supply of Service under GST?

Last Update Date : January 08, 2018

Under GST regime, tax is determined on the basis of place, time and supply of goods and services. This guide by earlyGST will help you in determining the place of supply of services. GST Act lays down provisions for deducing the place of supply of services.

Who Needs Establishing Place of Supply?

There are several reasons for determining place of supply:

  • It is important for persons dealing in cross-border services
  • It is also important for persons who deal in interstate transactions
  • The suppliers who operate within India from multiple locations and supply goods or services from different locations also need to determine it
  • Special transaction zones like SEZ, exempted zones etc. also need it

Why is it Necessary to Determine Place of Supply?

The following reasons make the determination of place of supply of services important:

  • It is required for the determination of place of levy and jurisdiction.
  • To avoid double taxation of a transaction by different states.
  • To enable proper tax collection and distribution by different states.
  • To ensure proper Rules for Goods and Services separate.
  • To ensure seamless credit.

Determining the Place of Supply of Services

GST is levied at the place where goods and services are actually consumed. The revenue from GST collection goes to the state where this consumption occurs. Based on the place of supply and nature of transaction, three different sub-types of GST are levied. IGST is applicable where there is inter-state transaction. SGST and CGST become applicable where there is intra-state transaction.

So, before determining place of supply, we need to first determine two things:

  • Location of the recipient of service
  • Location of the supplier of service

Location of the Recipient of Service

Based on the following four different situations, the place of the recipient of service is determined:

  • If the supply is received at a registered place of business then such place is considered as the location of recipient.
  • If the supply is received at a place other than the registered place of business (a fixed establishment elsewhere) then such establishment is considered the location of recipient.
  • If a supply is received at more than one establishment, whether the place of business or fixed establishment then the location of the establishment most directly concerned with the receipt of the supply is considered the location of recipient.
  • If the supply is received at a place other than those mentioned above then the location of the usual place of residence of the recipient.

Location of the Provider/Supplier of Services

The location of supplier of service is determined on the basis of the following situations:

  • If a supply is made from the registered place of business then such place is considered the location of supplier.
  • If a supply is made from a place other than the registered place of business but a fixed establishment elsewhere then the location of such establishment is considered the location of supplier.
  • If a supply is made from more than one establishment, whether the registered place of business or fixed establishment then the location of the establishment most directly concerned with the provision of the supply is considered the location of supplier.
  • If a supply is made from places other than those mentioned above then the location of the usual place of residence of the supplier is considered the location of supplier.

Determining the Type of Transaction

Once we have determined the location of recipient and supplier of service, it becomes important to understand the transaction occurring between them. It helps in determining the sub-type of GST applicable in each case.

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

Domestic Transactions

If both the parties involved in the transaction (supplier and recipient) are located in India then the transaction is considered as a domestic transaction. They are further categorised into two different types:

  • Inter-state transaction – It occurs when the supplier and recipient are located in two different states
  • Intra-state transaction – It occurs when the supplier and the recipient are located within the same state

Note: In general, the place of supply for services will be the location of the service recipient if the recipient is a registered person. If the service is provided to an unregistered person, the place of supply will either be location of the service recipient (if the address is available on record) or it will be location of service provider.

International Transactions

If any of the parties involved in the transaction (supplier and recipient) are located outside India then the transaction is considered as an international transaction.

Note: The place of supply for services in terms of international transactions will be the location of service recipient or the location of the supplier (if the location of service recipient is not available).

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