Download PDF Notes on Place of Supply
Place of Supply
GST is a destination-based consumption tax, i.e. the tax is levied on the consumption of supply at the destination thereof or at the point of consumption of such supply. The ‘place of supply’ denotes the place where the supply is consumed. Thus, place of supply determines the jurisdiction where the tax revenue should reach.
Goods, usually being tangible do not pose any significant problems for determination of their place of consumption. Services, usually being intangible pose problems w.r.t determination of place of supply mainly due to following factors:
- The manner of delivery of a service could be altered easily.
For example, telecom service could change from post-paid to pre-paid or billing address of the customer could be changed, repair or maintenance of software could be changed from onsite to online; banking services earlier required customer to go to the bank, now the customer can avail service from anywhere.
- Service provider, service receiver and the service provided may not be ascertainable or may easily be suppressed as nothing tangible moves and there would hardly be any trail.
- For supplying a service, a fixed location of service provider is not mandatory and even the service recipient may receive service while on the move. The location of billing could be changed overnight.
- Sometime the same element may flow to more than one location, for example, construction or other services in respect of a railway line, a national highway or a bridge on a river which originate in one State and end in the other State.
Similarly, a copyright for distribution and exhibition of film could be assigned for many states in a single transaction or an advertisement or a programme is broadcasted across the country at the same time.
An airline may issue seasonal tickets, containing say 10 vouchers which could be used for travel between any two locations in the country.
The card issued by New Delhi metro could be used by a person located in Noida, or New Delhi or Faridabad, without the New Delhi metro being able to distinguish the location or journeys at the time of receipt of payment.
- Services are continuously evolving and thus, continue to pose newer challenges. For example, 15-20 years back no one could have thought of DTH, online information, online banking, online booking of tickets, internet, mobile telecommunication etc.
Considering the difficulties in determining the actual place of consumption of services, the various elements involved in a service transaction are used as proxies for determining the place of consumption or place of supply of such services. A proxy which gives more appropriate result than others for determining the place of supply, could be used for determining the place of supply. The various elements used for determining the place of supply of a service are
(a) location of service provider
(b) location of service receiver
(c) place where the activity takes place/ place of performance
(d) place where the service is consumed
(e) place/person to which/whom actual benefit flows