Place of supply of goods or services
Continuing with the discussion, today we shall discuss the changes made in the section 10. It is newly added clause in the draft GST law for determining place of supply of services where location of service provider or the location of service receiver is outside India.
Sec 10: Place of supply of services where the location of the supplier or the location of the recipient is outside India
The provisions of this section apply to the location of the supplier of service or the location of the recipient of service is outside India. These have been majorly imported from the existing provisions of the place of provision of services rules, 2012.
As against general principles, a separate set of principles to determine the place of supply has been provided in cases where one of them i.e. location of supplier or location of recipient is outside India.
As discussed earlier a supply of service will be zero-rated only when the recipient is outside India, place of supply is outside India and consideration has been received in foreign currency. Hence Sec. 10 becomes very important because even if the recipient is outside India, if the place of supply is not outside India it will not be zero-rated and IGST shall be payable.
There is ambiguity as regards incorporation of provision regarding distribution of value of service in case where services of sub-section (3), (4) and (5) are provided in more than one State. As per sub-section (3) of section 10, the place of supply of performance based services shall be the location where services are actually performed. Further, as per sub-section (4) place of supply for services provided in relation to immovable property shall be the location of immovable property.
Also, the sub-section (5) of section 10 states that the place of supply of services by way of admission to event, fair shall be the place where the event is held. Now, sub-section (6) states that in case services specified in sub-section (3), (4) and (5) are provided at more than one location, place of supply shall be a location in taxable territory where the greatest proportion of service is provided.
Not only this, sub-section (7) states that where the services have been provided in more than one States, the place of supply of such services shall be taken as being in each of the States in proportion to the value of services so provided in each State as per the contract or on a reasonable basis. However, it is not understood the rationale behind the incorporation of the provision regarding the distribution of value among States as section 10 pertains to determining the place of supply of services in cases where the service provider or service receiver is located outside India thereby meaning that it is concerned with the levy of IGST.
Therefore, when IGST is being levied, the distribution of the value of services among different States is not understandable as IGST is a levy of Central Government and not concerned with State Government. The logic behind the insertion of the provision is not understandable and it is hoped that the government comes with clarification in this regard before implementation of GST regime.