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GST Update on Circular 103/22/2019-GST dated 28th June 2019

Clarification regarding determination of Place of Supply in certain cases

GST Update on Circular 103/22/2019-GST dated 28th June 2019
 
The place of supply has been in dispute since its inception. Even the dispute was there in service tax regime also. It has continued in GST era also. The Government intends to clarify the disputes related to place of supply by issuance of circular. This circular intends to discuss about the issues under Place of Supply in case of:-

* Services provided by Ports in respect of arrival of wagons at port.
 
* Services on unpolished diamonds such as cutting and polishing activity, which have been temporarily imported into India and are not put to any use in India.
 
 
1. Services provided by Ports in respect of arrival of wagons at port which includes the services are in respect of arrival of wagons at port, haulage of wagons inside port area up-to place of unloading, siding of wagons inside the port, unloading of wagons, movement of unloaded cargo to plot and staking hereof, movement of unloaded cargo to berth, shipment/loading on vessel. It was argued at some places that it is service related to immovable property, hence the place of supply should be the location of immovable property.

2. Further, two things decide whether a supply is inter-state or intra-state. One is location of supplier and other is place of supply. If location of supplier and place of supply are in the same state then CGST and SGST is to be charged. But if it is in different state then IGST is to be charged. Now, if we take place of supply as port being the immovable property and location of supplier i.e. location of shipping line. If Indian shipping line provides the services then CGST/SGST/IGST will be charged depending on location of supplier and place of supply. But if the foreign shipping lines provides the services then location of Service will be outside India but the place of supply is in India. Hence, it will be treated as import of service and importer has to pay tax under reverse charge method.
 
3. However, it is clarified that the services provided by the Port Authorities are not related to immovable property but are in relation or incidental to the cargo handling services, hence the place of supply will be goverened as per the 12(2) or 13(2) which are the general clauses of section 12 and 13 respectively. Sec 12(2) covers the cases where the Supplier and the Recipient both are in India.

If the Recipient is Registered POS will be the location where the Recipient is registered
If the recepient is not registered but his address exists on record POS will be the location of the address which exists on records
If the recepient is not registered and his address also does not exists POS will be the Location of Supplier

 
Thus, the Indian shipping line provides the services to Indian exporter or importer then tax will be charged accordingly. But in case of foreign shipping line providing service to Registered Indian customers then also the tax will be charged as import of service. If it is provided to unregistered Indian customer then also the place of supply will be usual place of business then it will be import of service. In that case also, the Indian recipient has to take the registration and pay the GST under reverse charge following the recent Advance Ruling in case of Jalaram feeds. Last situation where the usual place of business is not available on record is a very hypothetical as importer/exporter has to give usual place of business while filing Bill of Entry or shipping bill with the custom department. Hence, third situation does not arise. Thus, in every case, the tax is to be paid either under forward charge or reverse charge.
 
 
4. Second issue clarified by this circular is that the Services on unpolished diamonds such as cutting and polishing activity, which have been temporarily imported into India and are not put to any use in India then it has been clarified that the POS shall be governed as per 13(2) shall apply
 
Although it is the case of performance based services yet the circular has not clarified on this line. If performance based service is applicable then generally 13(3)(a) applies here. In that case, the place of supply will be place where performance has taken place. When it is imported into India and repairing is done in India then place of supply will be in India. The provider of service is also the person who has done repairing, hence the location of such service provider is also in India and place of supply is also in India, hence GST will be payable. But it will not qualify for export of service as place of supply is in India only.
 
However, the circular says that where 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, the place of supply would be determined as per 13(2).
Sec 13(2) covers the cases where any of the Supplier or the Recipient is outside India.
 

If the location of Recipient is known POS will be the location where the Recipient is located
If the location of recipient is not available POS will be the Location of Supplier

 
Now, in this case supply provider is in India and recipient is outside Indian then place of supply in that case will be location of recipient i.e. outside India. Hence, it will be termed as export of service if the payment is received in foreign convertible currency. Hence, it is beneficial to assessee as no tax will be applicable on export of services. The second provision of location of recipient is not available is not in existence in real life. He has to declare his address while sending goods into India. He has to declare normal value of goods also so as to clear the formalities of Customs.

This update is solely for educational purpose

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