Subject : Place of Supply

Indian Freight forwarding Company books air freight contract for Indian recipient for transportation of goods from Singapore to China.

Issue:

i) From which place supply is made?

ii) Whether this transaction is taxable in India?

Reply

The supply which is being made here is a supply of booking service by the Indian Freight Forwarding Company. The Freight Forwarding Company is not actually supplying goods or actually supply transportation services. They are simply doing booking and arranging for the transportation without actually carrying out the transportation or without actually selling the goods.

This transaction is undoubtedly taxable in India. There is nothing extra-territorial in the services being provided. The booking is done by a service provider located in India and the service is being provided to an Indian entity. The actual performance of the service, that is the booking, is also in India. Thus, situs of the service is in India. India therefore has jurisdiction to tax this service.

For services, the question of inter-state or intra-state supply is determined in accordance with Section 7(3) and Section 8(2) of Integrated GST Act:

“7(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in ––

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

shall be treated as a supply of services in the course of inter-State trade or commerce.”

“8(2) Subject to the provisions of section 12, supply of services where the location of the supplier and the place of supply of services are in the same State or same Union territory shall be treated as intra-State supply.”

The “location of supplier of service” for the purposes of determining whether supply is inter-state or intra-state is defined in Section 2(15) of the Integrated GST Act:

“2(15) “location of the supplier of services” means,––

(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and

(d) in absence of such places, the location of the usual place of residence of the supplier.”

Absent contrary indication in the query, we are assuming that the services are being provided by the Indian Freight Forwarding Company from their Indian registered place of business or Indian fixed establishment. Therefore, the “location of supplier of service” will be in India. There are no details given as to the State from which the Indian Freight Forwarding Company is providing services.

The place of supply must be determined either with reference to Section 12 or Section 13 of the Integrated GST Act. Sections 12 and 13 are mutually exclusive, in asmuch Section 12 deals with domestic supplies and Section 13 deals with international supplies. Sections 12(1) and 13(1) read as follows:

“12(1): The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.

13(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.”

We have already concluded that the location of supplier of service is in India. Now, to determine whether Section 12 applies or Section 13 applies, one must first determine whether the location of recipient of service is also in India or outside India. “Location of recipient of service” is defined in Section 2(14):

“2(14): “location of the recipient of services” means,––

(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and

(d) in absence of such places, the location of the usual place of residence of the recipient.”

No details are provided as to where the services are received, that is, in which State the services are received. From the query we are presuming that the services are also received in India. Therefore the “location of recipient of services” is within India itself. As per Section 12(1), when the location of supplier of services and the location of recipient of services are both within India, the place of supply is to be determined in accordance with Section 12.

Section 12 of the Integrated GST Act does not have any specific provision dealing with “intermediary services” or arranging the supply of transportation services unlike a specific provision in Section 13(8)(b) read with Section 2(13). However, since the supply here is covered by Section 12 and not Section 13, the two being mutually exclusive, one cannot look at provisions of Section 13 or draw analogies therefrom.

Section 12(8) deals with:

“2(8) The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.”

It is apparent that Section 12(8) cannot cover the booking service provided herein. Services “by way of” transportation means actual service of transportation and not just booking or arranging of transportation.

There is no specific provision at all in Section 12 dealing with the services provided herein. Therefore Section 12(2), which is like a residuary provision, will apply:

“12(2): The place of supply of services, except the services specified in sub-sections (3) to (14),––

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,––

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.”

The place of supply will therefore have to be determined as per Section 12(2). There are not sufficient details in the query, but the place of supply will be in India because the query says the recipient is in India.

It is not possible to determine whether the service is in inter-state or intra-state since there is no sufficient information on the State from which the services is being supplied or the State in which the service is being received. Therefore, the provisions of Section 7(3) or 8(2) for determination of inter-state or intra-state supply cannot be applied at this stage. Suffice to say that since the service is being provided from India and the place of supply is in India, the service will be taxable in India in some State as a local supply or taxable as an inter-state supply.