Rule 6 of IGST Rules 2017: Place of Supply (Leased Circuit)

Provisions under Rule 6 of the Integrated Goods and Services Tax (IGST) Rules, 2017, relating to determining the place of supply of leased circuit installed in different States/UTs, applicable w.e.f. 01/01/2019, are as under:

IGST Rule 6: Place of Supply of Leased Circuit Installed in Different States/UTs

The supply of services attributable to different States or Union territories, under sub section (11) of section 12 of the said Act, in the case of supply of services relating to a leased circuit where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of such services, shall be taken as being in each of the respective States or Union territories and in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case may be, shall be determined in the following manner, namely:-

(a) The number of points in a circuit shall be determined in the following manner:

(i) in the case of a circuit between two points or places, the starting point or place of the circuit and the end point or place of the circuit will invariably constitute two points;

(ii) any intermediate point or place in the circuit will also constitute a point provided that the benefit of the leased circuit is also available at that intermediate point;

(b) the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the number of points lying in the State or Union territory.

Illustration 1: A company T installs a leased circuit between the Delhi and Mumbai offices of a company C. The starting point of this circuit is in Delhi and the end point of the circuit is in Mumbai. Hence one point of this circuit is in Delhi and another in Maharashtra. The place of supply of this service is in the Union territory of Delhi and the State of Maharashtra. The service shall be deemed to have been provided in the ratio of 1:1 in the Union territory of Delhi and the State of Maharashtra, respectively.

Illustration 2: A company T installs a leased circuit between the Chennai, Bengaluru and Mysuru offices of a company C. The starting point of this circuit is in Chennai and the end point of the circuit is in Mysuru. The circuit also connects Bengaluru. Hence one point of this circuit is in Tamil Nadu and two points in Karnataka. The place of supply of this service is in the States of Tamil Nadu and Karnataka. The service shall be deemed to have been provided in the ratio of 1:2 in the States of Tamil Nadu and Karnataka, respectively.

Illustration 3: A company T installs a leased circuit between the Kolkata, Patna and Guwahati offices of a company C. There are 3 points in this circuit in Kolkata, Patna and Guwahati. One point each of this circuit is, therefore, in West Bengal, Bihar and Assam. The place of supply of this service is in the States of West Bengal, Bihar and Assam. The service shall be deemed to have been provided in the ratio of 1:1:1 in the States of West Bengal, Bihar and Assam, respectively.

Amendments History:

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Commentary on Rule 6 of the IGST Rules, 2017

Rule 6 of the Integrated Goods and Services Tax (IGST) Rules, 2017, provides guidance on determining the place of supply for services related to a leased circuit installed in more than one State or Union territory. This is important because the allocation of tax revenue depends on the location of the supply of services. Rule 6 is applicable with effect from 01/01/2019. The rule outlines the following key points:

1. Determining the number of points in a circuit:

a) In a circuit between two points, both the starting and end points are counted.

b) Any intermediate point where the leased circuit’s benefit is available is also counted as a point.

2. Allocating the supply of services across States or Union territories: The supply of services is distributed in proportion to the number of points in each State or Union territory.

Three illustrations have also been provided to clarify the application of Rule 6.

In summary, Rule 6 of the IGST Rules, 2017, helps determine the place of supply for services related to leased circuits installed across multiple States or Union territories. It specifies the method for counting points in a circuit and for allocating the supply of services proportionally across these locations.

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Note: The Integrated Goods and Services Tax (IGST) Rules 2017 were initially notified by CBEC vide Integrated Tax Notification 4/2017 dated 28/06/2017 (Rule 1 & 2). Subsequently, IGST Rule 3 has been inserted vide Notification 12/2017 and IGST Rules 4 to 9 have been inserted vide Notification 4/2018. Information on this page is a Rule-wise compilation of Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.