SECTION-16: PLACE OF SUPPLY OF SERVICES-PART-II:-

GST Update 06.02.2016

GST DAILY DOSE OF UPDATION:-

SECTION-16: PLACE OF SUPPLY OF SERVICES-PART-II:-

The sub-section (5) states that the place of supply of restaurant and catering services and services in relation to training, performance appraisal, personal grooming, fitness, beauty treatment, health services including cosmetic and plastic surgery shall be the location where the services are actually performed. This sub-section contains provisions similar to Rule 4 of the Place of Provision of Service Rules, 2012 captioned as ‘Performance Based Services’ wherein place of provision of service in respect of goods that are required to be made physically available by the recipient of service to the provider of service shall be the place where the services are actually performed. For example- repair of goods, beauty treatment services etc.

However, inclusion of restaurant and catering services in this sub-section can invite many controversies. This is for the reason that as per sub-section 4 of the proposed GST Act, 2016, place of supply for services of hotel, guest house etc. is considered as the location of immovable property. It is commonly observed that every hotel, inn, club or guest house also provides restaurant/catering services. Consequently, the place of supply of the said services should be governed by sub-section 4 itself. Moreover, even the house boat/vessels are covered by sub-section 4.

This may lead to disputes in cases such as catering services provided in trains. It is commonly observed that the food for sale in trains is being prepared at various stations and not in the train itself but supply of food is being made in train. In such a case, as per provisions of sub-section 5, the place of supply would be the place where the services are actually performed. The train passes through number of destinations and it might be difficult to keep track record of places where supply of food has been made. On the contrary, if the catering services were included in sub-section (4), the situation would be much easy as the place of supply would be the location of immovable property, being kitchen at particular station.

Furthermore, in GST regime, three types of taxes would be levied, i.e., SGST, CGST and IGST. If the place of supply in case of hotels is being considered as where the immovable property is being situated, then it would lead to difficulties in availing input tax credit in cases where seminars/conventions are being conducted in different states. For example, if a manufacturer conducts business seminars/conventions at hotels situated in state other than the state in which he is registered, the said manufacturer will be unable to claim input tax credit of SGST levied by the hotel. Therefore, the drafting of Place of Supply Rules requires examination of every possibility so that litigations are avoided to the minimum possible level.

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GST Update 06.02.2016

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