Section 13 of IGST Act 2017: Place of Supply of Services (Supplier or Recipient located Outside India)

Provisions under Section 13 of the Integrated Goods and Services Tax (IGST) Act, 2017 relating to “Place of supply of services where location of supplier or location of recipient is outside India”, are as under:

Section 13 of IGST Act 2017: Place of supply of services where location of supplier or location of recipient is outside India (CHAPTER V PLACE OF SUPPLY OF GOODS OR SERVICES OR BOTH)

(1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.

(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.

(3) The place of supply of the following services shall be the location where the services are actually performed, namely:—

(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; [Refer Note 1]

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process; [Refer Note 1]

(b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

(4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

(5) The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held.

(6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory.

(7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories 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.

(8) The place of supply of the following services shall be the location of the supplier of services, namely:–

(a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) intermediary services;

(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.

Explanation: For the purposes of this sub-section, the expression,–

(a) “account” means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account;

(b) “banking company” shall have the same meaning as assigned to it under clause (a) of section 45A of the Reserve Bank of India Act, 1934;

(c) ‘‘financial institution” shall have the same meaning as assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934;

(d) “non-banking financial company” means,–

(i) a financial institution which is a company;

(ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or

(iii) such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.

(9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. [Refer Note 2]

(10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey.

(11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.

(12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

Explanation: For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:–

(a) the location of address presented by the recipient of services through internet is in the taxable territory;

(b) 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;

(c) the billing address of the recipient of services is in the taxable territory;

(d) the internet protocol address of the device used by the recipient of services is in the taxable territory;

(e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

(f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;

(g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

(13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.

Amendments History:

1. Second Proviso to Sub-clause (3)(a) substituted vide the IGST (Amendment) Act, 2018 (GOI Notification dated 30/08/2018), followed with CBIC Notification on commencement date of 01/02/2019 vide Integrated Tax Notification 1/2019 dated 29/01/2019.

2. Sub-section (9) omitted vide Section 162 of the Finance Act, 2023, followed with Central Tax Notification 28/2023 on commencement date of 01/10/2023.

Commentary

Section 13 of the Integrated Goods and Services Tax (IGST) Act, 2017 deals with determining the place of supply of services when either the supplier or the recipient is located outside India. This section is crucial for understanding the tax implications of cross-border transactions involving services. Here’s a brief commentary on the key provisions:

Section 13(1) of the IGST Act

Section 13(1) states that this section applies when either the supplier or the recipient is located outside India.

Section 13(2) of the IGST Act

Section 13(2) establishes that the place of supply of services, except those mentioned in sub-sections (3) to (13), is the location of the recipient. If the recipient’s location is unavailable, the place of supply defaults to the supplier’s location.

Section 13(3) of the IGST Act

Section 13(3) specifies certain services where the place of supply is the location where services are performed. These include services related to goods that need to be made physically available and services requiring the physical presence of the recipient or their representative.

Section 13(4) of the IGST Act

Section 13(4) covers services directly related to immovable property, such as expert services, estate agents, accommodation providers and construction work. The place of supply is the location of the immovable property.

Section 13(5) of the IGST Act

Section 13(5) determines the place of supply for services concerning events (cultural, artistic, sporting, educational, entertainment, etc.) and ancillary services to be the location where the event is held.

Section 13(6) of the IGST Act

Section 13(6) addresses situations where services covered by sub-sections (3) to (5) are supplied at multiple locations, including a taxable territory. The place of supply is the location within the taxable territory.

Section 13(7) of the IGST Act

Section 13(7) deals with services supplied in more than one State or Union territory. The place of supply is considered to be in each respective State or Union territory, with the value of supplies apportioned based on contract/agreement or other prescribed methods.

Section 13(8) of the IGST Act

Section 13(8) covers specific services where the place of supply is the location of the supplier, including services provided by banking companies, financial institutions, non-banking financial companies to account holders, intermediary services and short-term hiring of means of transport.

Section 13(9) of the IGST Act

Section 13(9) states that the place of supply for transportation services (excluding mail or courier) is the destination of the goods.

Section 13(10) of the IGST Act

Section 13(10) determines that the place of supply for passenger transportation services is where the passenger embarks on the conveyance.

Section 13(11) of the IGST Act

Section 13(11) establishes that the place of supply for services provided during a passenger transport operation is the first scheduled point of departure for the journey.

Section 13(12) of the IGST Act

Section 13(12) addresses the place of supply for online information and database access or retrieval services. The location of the recipient of services is considered the place of supply, with specific conditions provided in the Explanation to identify the recipient’s location.

Section 13(13) of the IGST Act

Section 13(13) grants the Government power to notify specific services or circumstances to determine the place of supply to prevent double taxation or non-taxation and ensure uniform application of rules.

To summarize, Section 13 of the IGST Act, 2017 plays a crucial role in determining the place of supply for services when the location of the supplier or recipient is outside India. It outlines specific rules for different types of services and scenarios, with the aim of preventing tax evasion, double taxation or non-taxation. This section is essential for understanding the tax implications of cross-border transactions involving services and ensuring compliance with international tax laws and agreements.

In practice, businesses engaging in cross-border services must carefully examine the provisions of Section 13 to determine the place of supply and the appropriate tax rate to apply. This would involve considering factors such as the type of service provided, the location of the supplier & recipient and any special rules or exceptions that may apply. By doing so, businesses can ensure accurate tax reporting, avoid penalties for non-compliance and minimize the risk of tax disputes or double taxation.

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Note: The IGST Act 2017 has been notified vide GOI Notification dated 12/04/2017, which has subsequently been amended through IGST Extension to J&K Act 2017, IGST (Amendment) Act 2018. Finance Act 2019, Finance Act 2020, Finance Act 2021, Finance Act, 2022 and Finance Act, 2023, including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective IGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of the 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.