[Opinion] Determination of Location of Supplier under GST | Practical Issues

Monika Singla – [2024] 160 taxmann.com 163 (Article)

Determining whether a transaction is intra-State or inter-State usually depends upon two factors. One; the location of the supplier and the second; the place of supply. When both, the supplier’s location and the place of supply, are in same State, the transaction is termed as intra-State supply; otherwise, the supply is referred as inter-State supply. A taxable supply will be subject to CGST and SGST if it is an intra-State supply or IGST if it is an inter-State supply. Hence determination of the location of supplier is an important aspect for correct levy of GST.

This article discusses the relevant legal and various practical aspects relating to the meaning of the term ‘Location of Supplier’ under the GST legislation.

1. Location of Supplier of Service

Section 2(71) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) read with section 2(51) of the Integrated Goods and Services Tax Act, 2017 (‘IGST’) provides the location of supplier of service as under:

Each of the above clauses given under the definition of Location of supplier of services are discussed in detail in the below-mentioned paragraphs.

1.1. Location of supplier of services – Registered place of business

The first limb of the definition of the location of supplier of services provides that the place where the supplier of services is registered shall be treated as the location of supplier of services. Therefore, if a person has obtained registration, then such place would be considered as the location of supplier of services.

1.2. Location of supplier of services – Fixed Establishment

The second limb of the definition of location of supplier of services provides that the fixed establishment (other than the place for which registration is obtained) would be considered as location of supplier of services.

Section 2(50) of the CGST Act read with Section 2(7) of the IGST Act provides that fixed establishment is a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for its own needs.

It has been held in the case of Titanium Ltd. v. Finanzamt Osterreich [2021] 127 taxmann.com 896/86 GST 717 (ECJ) that mere existence of property is not sufficient where own staff is not available to run the property and the decision making power is retained by the supplier himself.

1.3. Location of supplier of services – Services from more than one establishment

The third limb of the definition of location of supplier provides that when the supplier renders services from more than one establishment then the location of the supplier shall be the place which is most directly concerned with the provision of supply.

How the location of establishment most directly concerned be determined?

The determination of establishment most directly concerned would depend on the facts and circumstances of each case.

Under the erstwhile regime of Service Tax, where there was a similar provision, it was clarified by the CBIC that below (inclusive list) can be referred to as supporting document to understand the establishment that is most directly concerned for the provision of supply of services:

• Contract between the service provider and receiver;
• Where there are no written contracts, any written account (documents, correspondence/e-mail, etc.) between parties which sets out in detail their understanding of the oral contract;
• Establishment from where services are actually provided;
• Details on how the business fits into any larger corporate structure
• Establishment whose staff is actually involved in the execution of the job;
• Performance agreements (which may be indicative both of the substance and actual nature of work performed at a particular establishment)

It was further explained that normally in the case of multiple establishments of a person, it will be the establishment that actually provides a service would be treated as ‘directly concerned’ with the provision of services, notwithstanding the contractual position or invoicing or payment.

Example A company is incorporated in India, but provides its services entirely from Singapore. The location of this service provider is Singapore, being the place where the establishment most directly concerned with the supply is located.

1.4. Location of supplier of services – Usual place of residence

The last limb of the definition is the residuary clause and shall be applied when no other possible limbs of the above definition are applicable. In cases where the supplier is neither registered nor conducts services from any established locations, the usual place of residence of the supplier can be considered as the location of the supplier for services.

What is the meaning of the usual place of residence under GST?

The term usual place of residence in the case of an individual has been defined to include the place where the individual ‘ordinary’ resides. In other cases, it would be the place where the person is incorporated or legally constituted.

It was clarified in Education guide of Service Tax that under the erstwhile regime, the usual place of residence of an individual is the place (Country, State, etc.) where the individual spends most of his time for the period in question. It is likely to be the place where the individual has set up his home, or where he lives with his family or is in full time employment. Individuals are not treated as belonging in a country if they are short term, transitory visitors (for example if they are visiting as tourists, or to receive medical treatment or for a short-term educational course). An individual cannot have- more than one usual place of residence.

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