PLACE OF SUPPLY

Types of Supply

Intra-State supply will be the case where the LS and POS are in the same State. Inter-State Supply would be a case where LS is in one state and POS is in another State. Since there are other kinds of Inter-State supply as well, for ease of reference we refer to this Inter-State supply as Domestic Inter-State supply.

There are four types of Inter-State supplies as envisaged by section 7 of the Integrated Goods and Services Tax Act, 2017 [“IGST Act”]:

1. Domestic Inter-State supply i.e. supply between two states.
2. Cross border supply.
3. Supply to or by a
   1. SEZ Developer; or
   2. SEZ Unit.
4. Non Intra-State supply not covered above.

Domestic Inter-State supply is a case where the LS and POS are:

1. In two different States; or
2. In two different Union Territories; or
3. One in a State and another in a Union Territory.

N.B.: For ease of reference, while referring to Domestic POSoS in this article, the elucidation of the provisions will be in respect of (i) above though it would be the same for (ii) and (iii).

Cross Border supply of service will cover the following supply of services:

1. Import of Services.
2. Export of Services.

N.B.:

1. Import of services and export of services is separately explained in Annexure 1 attached.
2. On a perusal of the said Annexure 1, it will be noted that in respect of export of services under GST scenario, the condition of receipt of foreign convertible exchange is a must as against the current Place of Provision of Services Rules, 2012, where the said condition of receipt of foreign currency is relevant only to the extent of allowance of input credit in respect of services used for exports but service tax would not be payable even in the event of non-receipt of foreign convertible exchange.

Place of Supply of Goods under GST

• 5 categories of specific guidelines have been enacted under Section 10 of IGST Act for determining the place of supply rules:
  • Supplies involving movement of goods
  • Supplies not involving movement of goods
  • Supplies made on direction of third parties
  • Goods assembled or installed at site
  • Supplies made on board a conveyance
• Government is empowered to prescribe method for determination of place of supply if a particular situation is not adequately covered by the afore-mentioned 5 categories. However, assessing officers have no authority to deviate from the provisions contained in Section 10 and apply their own methods unless Government prescribes a particular method.

Sec 10 (1)	Situation	Place of Supply
(a)	Supply INVOLVES movement of Goods, either by supplier or recipient	Location of Goods at the time at which Movement terminates
(b)	Goods delivered by Supplier to Recipient/ other on direction of 3rd person, before/during movement, transfer of title documents/otherwise	Location of Principal place of business of such 3rd person
(c)	Supply does NOT INVOLVE movement of Goods, either by supplier or recipient	Location of Goods at the time of delivery to recipient
(d)	Goods are Assembled/ Installed at site	Location of place of such installation or assembly
(e)	Supply on Board a Conveyance viz, vessel/aircraft/train/motor vehicle	Location at which goods are taken on board

Sec 10 (2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed

Place of Supply of Goods – Import / Export – IGST sec 11

Sec 11	Situation	Place of Supply
(a)	Goods imported into India	Location of Importer
(b)	Goods exported from India	Location outside India

Place of Supply of Services under GST

Introduction

The Goods and Services Tax [“GST”] is a destination based tax on consumption of goods and services i.e., the tax should accrue to the taxing authority which has jurisdiction over the place of consumption. For this purpose, one needs to determine what is popularly known as Place of Supply [“POS”] i.e. the place where goods or services have been supplied so as to decide the taxing jurisdiction. ‘Place of Supply of Services’ [“POSoS”] along with the ‘Location of Supplier of Service’ [“LS”] would determine whether the supply is intra-State or inter-State, that are the two types of supplies in GST but having different GST implications.

PLACE OF SUPPLY OF SERVICES [“POSOS”]

The POSoS is the Heart of GST which is very likely to be subjected to “Attacks” post GST implementation. A proper study of POSoS may ensure “Bypass” ensuring no need of a “Stent” or a “Stunt”.

As explained in the earlier paragraphs, two factors are relevant to determine whether the supply is inter-State or intra-State viz. LS and POSoS. Further, as per the POSoS provisions, the basic principle is that the place of supply of service shall be the ‘Location of Recipient of service’ [“LR”]. However, exceptions have been provided in case of performance based services, immovable property based services, certain specified services and transportation service etc. where other criteria such as location of supplier of service, location of performance of service, location of immovable property etc. are relevant. Thus in effect, there would be three factors which are relevant in determining whether the supply is intra-State or inter-State viz.

1. LS;
2. LR; and
3. POSoS.

The ‘Location of Supplier of Service’ and ‘Location of Recipient of Service’ are defined separately in GST based on certain tests. Of course, these tests will really test the legal acumen of assessee, department and the judiciary in the years to come. In fact, to locate the LS or LR would be in many cases a Big Challenge. It is separately being dealt in Annexure 2 attached.

Once the LS and LR both are determined, it would be necessary to determine the POSoS in order to determine whether the supply is inter-State or intra-State.

Determining the POSoS has always been a challenging task world over. However, internationally, the POSoS is generally determined in a cross border transaction i.e. where either the Service provider or the Service recipient is abroad and the other is in home country. The GST in India is different due to its dual structure [i.e. Central Tax (“CT”) & State Tax (“ST”)]. Thus, the study of POSoS would involve:

1. Study of Domestic POSoS i.e. where LS and LR both are in India. [Section 12 of IGST Act]
2. Study of Cross Border POSoS i.e. where either LS or LR is outside India. [Section 13 of IGST Act]

Keeping in mind the constraints of space in this article, this part deals with the Domestic POSoS which is unique and has raised various challenges and issues. As regards the Cross border POSoS; they are similar to the existing Place of Provision of Service Rules, 2012 under the Service tax law, and hence are dealt with very briefly.

DOMESTIC PLACE OF SUPPLY OF SERVICE [SECTION 12 OF THE IGST ACT]

While the catchword is “One Nation, One Tax”, The Central Goods and Services Tax Act, 2017 [“CGST Act”] and The State Goods and Services Tax Act, 2017 [“SGST Act”] have been so designed that each State is an independent taxing jurisdiction. Each state has been ring fenced i.e. a tax paid in one State cannot be adjusted against tax liability of another State. Further, Inter-unit supply between a unit in one State to an unit in another State though belonging to the same entity is considered as supply. The LS and POS will also have far reaching impact on ultimate cost of goods and services based on the credit availability. Thus, the study of Domestic POSoS is most crucial to the business.

Section 12(1) of the IGST Act provides for determination of the Domestic POSoS i.e. where the LS and LR both are in India. The provisions dealing with Domestic POSoS for different situations are explained below.

General principle – POSoS is Location of service recipient [Section 12(2)]

The general or default principle is that the POSoS is the –

1. ‘LR’ if the supply is made to a recipient registered for GST (i.e. B2B transactions);

   However in case of supply to an unregistered person (i.e. B2C transactions), the POSoS will be –

   1. ‘LR’ where the recipient’s address is available in the records of the supplier; and
   2. ‘LS’ in other cases.

The above general principle would apply unless the transaction falls within any of the other sub-sections of Section 12.

PoSoS relating to immovable property would be the location of immovable property [Section 12(3)]

The POSoS of the following services shall be the place where the immovable property is located or intended to be located [i.e. property to come into existence]:

Sec 12	Particulars	Place of Supply
3(a)	Directly in relation to immovable property including architects, interior decorators, surveyors, engineers and other related experts or estate agents, grant of right to use such property, carrying out coordination of construction work	Location of Immovable Property
3(b)	Lodging by hotel, inn, guest house, homestay, club or campsite, including house boat / vessel	Location of Immovable Property/ boat / vessel
3(c)	Accommodation in immovable property for occasion or marriage / receptions / social /cultural / religious / official matter	Location of Immovable Property
3(d)	Services ancillary to (a) to (c) above	Location of Immovable Property / boat / vessel

1. Services provided directly in relation to an immovable property e.g. construction, repair, renovation of a building, etc. Services remotely connected to immovable property would not be covered u/s. 12(3) e.g. real estate feasibility studies or advice on capital gains, etc;
2. Services provided by experts e.g. architects, interior decorators, surveyors, engineers, and other related experts or estate agents;
3. Grant of rights to use immovable property.
4. Carrying out or co-ordination of construction work;
5. Provision of accommodation in immovable property for organising marriage or reception or matters related thereto, official, social, cultural, religious or business function including services in relation to such function at such property;
6. Ancillary services to above 5 services

Comments: When a company’s employee based in Mumbai goes to Delhi for office work, the supply for hotel accommodation would be an intra-State supply [LS and POSoS fall in Delhi] but the Delhi CT+ST charged by hotel may not be available as credit to the Mumbai-based company due to the ring fencing.

N.B.

1. Where the location of immovable property or boat or vessel is located or intended to be located outside India, the POSoS shall be the ‘LR’ in India. [Proviso to Section 12(3)]

   Comments: This is akin to the existing rule 8 read with rule 5 of the Place of Provision of Services Rules, 2012 where the place of provision of service is where the ‘LR’ is situated and not where the immovable property is situated.

2. Where the immovable property or house boat or vessel is in more than one State/Union Territory [“UT”], the supply would be considered to be made in each of respective State or UT in proportion to value for service separately collected or determined as per contract/agreement and if there is no contract/agreement then on such other basis in the manner prescribed.

   Comments: It would involve a laborious exercise to determine the POSoS when the boat wherein the accommodation services are provided, moves from one State to another State. Perhaps it would have been better to provide that the POSoS be the place of commencement of journey by the house boat or vessel.

Performance Based Services [Sections 12(4) and 12(5)]

Sec 12	Particulars	Place of Supply
4	Restaurant / Catering/ Personal Grooming / Fitness/Beauty Treatment/ Health Service including Cosmetic and Plastic Surgery	Location where actually performed
5 (a)	Training and Performance appraisal to a registered taxable person	Location of such person
5 (b)	Training and Performance appraisal to person OTHER THAN a registered taxable person	Location where actually performed

Event Based Services [Sections 12(6) and 12(7)]

Sec 12	Particulars	Place of Supply
6	Supply BY WAY OF ADMISSION to a cultural/artistic / sporting/ scientific/educational/ entertainment event/amusement park & ancillary services thereto	Location where event is actually held / located
7	Organisation of specified event including conference, fair, exhibition, celebration or similar event services ancillary to organisation of above events; & assigning of sponsorship to above events provided : To registered person (B2B)	Location of such person if provided to registered person
	To unregistered person (B2C) – For event held in India For event held outside India	For services to unregistered persons, Location where event is held Location of recipient of service
	N.B. Events held in more than 1 State for a consolidated amount	Supply in each State/UT in proportion to value of service separately collected or determined from terms of contract/agreement or on other basis prescribed

Goods Transportation Services [Section 12(8)]

Supply of	POSoS
Goods transportation service (including by mail/courier) to — Registered person (B2B) Unregistered person (B2C)	Location of such person Location where goods are handed over for their transportation
w.e.f. 1-2-2019 Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods.

Comments: This rule would apply to transport by road, rail, air and sea whether locally or outside India provided the supplier and recipient both are in India.

Passenger Transportation Service [Section 12(9)]

Supply of	POSoS
Passenger Transportation Service to
Registered person (i.e. B2B)	Location of such person
Unregistered person (point of embarkation known)	Place where passenger embarks on conveyance for continuous journey*
Point of embarkation unknown in respect of right to passage for future use	Refer Para 4.3 [i.e. General Rule]

*Return journey to be treated as separate journey

SERVICES PROVIDED ON BOARD A CONVEYANCE [SECTION 12(10)]

Sec 12	Particulars	Place of Supply
10	Supply of service on board a conveyance such as vessel / aircraft / train /motor vehicle	Location of first schedule point of departure

Comments: Issues – Can it be said that supply of packaged Drinking water/packed Biscuit is ‘Supply of goods’ and Supply of Sandwich/ Samosa is ‘Supply of Service’. While POS of Service is first scheduled point of departure irrespective of where the food/eatables is taken on the board, the POS of goods is the location at which the goods are taken on board. Thus it is imperative to decide whether the said supply is supply of goods or supply of services.

TELECOMMUNICATION/DATA TRANSFER/ BROADCASTING / CABLE / DTH SERVICES

[SECTION 12(11)]

Supply of service by way of	POSoS
Telecom line, leased circuits, internet circuit, cable/dish antenna	Location of installation for receipt of such services
Lease circuit installed in more than 1 State/UT and consolidated amount charged	Supply in each State/UT in proportion to value of service collected or determined from contract and in absence, on other basis as may be prescribed
Post paid mobile connection for telecommunication/ internet services	Location of billing address of service receiver in supplier’s records and if such address not available location of supplier
Prepaid mobile connection for telecommunication/ internet services/ DTH services on pre- payment—
Through sale of SIM card or voucher by selling agent, Distributor, reseller	Address of selling agent, distributor, reseller as per supplier’s record at time of supply
Provided to final subscriber	Location where prepayment received/voucher sold
Through internet banking/electronic mode	Location of service receiver as available in record of supplier
Mobile connection for telecommunication/ internet services other than postpaid/pre-payment basis	Address of recipient as per supplier’s record & if such address not available location of supplier

BANKING & OTHER FINANCIAL SERVICES (INCLUDING STOCK BROKING SERVICES) [SECTION 12(12)]

Supply of	POSoS
Banking and Other Financial Services: Where Location of recipient available in supplier’s record Where Location of recipient not available in supplier’s record	Location of such person Location of supplier of service

N.B.: The CGST law does not define what is Banking and Other Financial Services. Does it cover only services provided by banks or NBFC? What about merchant banking services, asset management services etc., which under the existing definition are covered under Banking and Other Financial Services. The only saving grace is whether it is rule 12(2) or 12(12) it may not make a significant difference.

INSURANCE SERVICES [SECTION 12(13)]

Supply of		POSoS
Insurance Services to:
•	Registered person (B2B)	•	Location of such person
•	Unregistered person (B2C)	•	Location of recipient as per records of supplier of service

N.B.: The policy holder’s address will be there in Insurance company’s records

ADVERTISEMENT SERVICES TO CENTRAL/STATE GOVERNMENT/STATUTORY BODY/LOCAL AUTHORITY/ UT FOR IDENTIFIABLE STATES [SECTION 12(14)]

Sec 12	Particulars	Place of Supply
14	Advt to CG / SG / stat body / local authority for identifiable states	Location of Such state

The POSoS for the above services shall be each State and the value of supply would be proportionate to the amount attributable for dissemination in each State determined as per contract/agreement or in absence of contract/agreement on any other basis as may be prescribed.

CROSS-BORDER PLACE OF SUPPLY OF SERVICES [SECTION 13 OF IGST ACT]

Section 13 of IGST Act provides for determination of the Cross- border POSoS i.e. where the ‘LS’ or ‘LR’ are outside India [section 13 of IGST Act]. The Cross-border POSoS for different situations envisaged by section 13 are summarised below:

Sl. No.	Description of service	Place of supply of services
1.	Basic principle (All services except if specifically covered below)	Location of service recipient. If location of recipient is not available in the ordinary course of business, then location of supplier
2.	Performance based Service [See note (i) below]	Location of performance of service
3.	Service relating to Immovable Property	Location of the immovable property
4.	Service relating to Events [See Note (ii)]	Location of event
5.	Services (2, 3, 4 above) supplied at more than one location [including location in Taxable Territory (‘TT’)]	Location in the Taxable Territory
6.	Services (2, 3, 4 above) supplied in more than one State or Union Territory. [See Note (iii)]	Respective State/ Union Territory. Value of supply — in proportion to value of service separately collected or based on contract/ agreement; and in case no contract – on prescribed basis
7.	Specified Services [See Note (iv)]	Location of service provider
8.	Goods Transportation services (other than mail or courier)	Place of destination of goods
9.	Passenger transportation service	Place of embarkation for continuous journey
10.	Service on board a conveyance during the course of passenger transportation	First scheduled point of departure of conveyance on the journey
11.	Online Information Database Access or Retrieval (OIDAR) services	Location of recipient of service [See note (v)]

DETAILED CROSS BORDERS (POSOS)

Sec 13	Particulars	Place of Supply
3(a)	services supplied in respect of goods that are required to be made physically available by the recipient of service to the supplier of service, or to a person acting on behalf of the supplier of service in order to provide the service	location where the services are actually performed
3 (a) 1st Proviso	when such services are provided from a remote location by way of electronic means	location where goods are situated at the time of supply of service
3 (a) 2nd Proviso	shall not apply in the case of a service supplied in respect of goods that are temporarily imported into India for repairs or for any other treatment or process and are exported after repairs or for any other treatment or process without being put to any use in India, other than that which is required for such repairs
3(b)	services supplied to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the recipient, with the supplier for the supply of the service	location where the services are actually performed
4	directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or coordination of construction work, including architects or interior decorators	Location of immovable property or intended to be located
5	supplied by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission	Location where event is actually held
6	any service referred to in sub-sections (3), (4), or (5) is supplied at more than one location, including a location in the taxable territory	location in the taxable territory where the greatest proportion of the service is provided.
7	services referred to in sub-sections (3), (4), (5) or (6) are supplied in more than one State,	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 ascertained from the terms of the contract or agreement entered into in this regard or, in absence of such contract or agreement, on such other reasonable basis as may be prescribed in this behalf
8	(a) services supplied by a banking company, or a financial institution, or a nonbanking financial company, to account holders;	location of the supplier of service
	(b) intermediary services;
	(c) services consisting of hiring of means of transport other than aircrafts and vessels except yachts, upto a period of one month.
9	services of transportation of goods, other than by way of mail or courier	place of destination of the goods.
10	in respect of a passenger transportation service	Place where the passenger embarks on the conveyance for a continuous journey
11	services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board	first scheduled point of departure of that conveyance for the journey
12	online information and database access or retrieval services	location of recipient of service
13	In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances	place of effective use and enjoyment of a service

Notes:

1. Performance based services are of two types:
   1. Work upon goods: Services supplied in respect of goods made physically available by service recipient to the supplier or to any person acting on behalf of the supplier in order to provide the service e.g.

      Repairs, Storage and Cargo handling. There are two exceptions.

      1. Remote access – POSoS is Location of goods at the time of supply of service;
      2. Goods temporarily imported into India for repair or treatment or process and re-exported subject to the condition that goods not put to use in India (except for such repair). POSoS under Sl. No. 2 would not apply. Basic principle (Sl. No. 1) would apply.
   2. Work upon individuals: Services supplied to individuals physically present in their personal capacity or on service recipient’s behalf e.g. beauty treatment, plastic surgery, etc.
2. In this case, it would cover supply of admission to an event as well as organisation of event and services ancillary thereto. Thus, in case of cross-border supply of event based services, POSoS is location of event but in case of Domestic POSoS, the location of event is relevant for the services of admission but for organisation of the event, the POSoS is different as explained above.
3. Thus, on a reading of Sl. Nos. 5 & 6 above it appears that if an architect in India provides services for his Indian client’s immovable property abroad, the POSoS would be outside India. But however, if he supplies services to the same person for 3 properties – one in UK, one in Karnataka, and one in Kerala, the POSoS for the entire consideration would be Kerala and Karnataka.
4. Specified services are:
   1. Services supplied to Account holders by banks, Financial Institutions, NBFCs;
   2. Intermediaries;
   3. Hiring means of transport [including yachts but excluding aircrafts & vessels] up to a month.
5. Person receiving OIDAR services is deemed to be located in Taxable Territory (TT) –

   If any 2 of the following non-contradictory conditions are satisfied viz.:—

   • Location of address presented by service recipient (SR) via internet is in TT;
   • Credit card/debit card/store value card/charge card/smart card/any other card by which SR settles payment has been issued in TT;
   • SR's billing address is in TT;
   • Internet Protocol [IP] address of device used by SR is in TT;
   • SR's bank account used for payment maintained in TT;
   • Country code of SIM card used by SR is of TT;
   • Location of SR's fixed landline through which service is received by person, is in TT.

CHALLENGES

Some of the challenges in the implementation of GST qua POS provisions have been dealt with while elucidating the provisions to determine Location of supplier of service and Location of recipient of service in Annexure 2. We have also given our comments on some of the significant Domestic POSoS provisions.

However as explained in Annexure 2, the Biggest Challenge is WHO is providing service to WHOM and from WHERE? This will be the most crucial question to be answered. This will also involve examining whether LS and LR be – the contracting office or actual performing/receiving office.

ANNEXURE 1

Relevant extract of section 2 of IGST Act

“2(11) “import of service” means the supply of any service, where

1. the supplier of service is located outside India,
2. the recipient of service is located in India, and
3. the place of supply of service is in India,

“2(6) “export of service” means the supply of any service when

1. the supplier of service is located in India,
2. the recipient of service is located outside India,
3. the place of supply of service is outside India,
4. the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India, and
5. the supplier of service and recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 of section 8;

N.B.: In respect of export of services under GST scenario, the condition of receipt of foreign currency is a must as against the current Place of Provision of Services Rules, 2012, where the said condition of receipt of foreign currency is relevant only to the extent of allowance of input credit in respect of services used for exports, but service tax would not be payable.

ANNEXURE 2

Location of supplier of service and
Location of recipient of services
[Sections 2(15) and 2(14) of the IGST Act]

A2. Provisions to determine Location of supplier of service and Location of recipient of service

A2.1 The ‘location of supplier of services’ and ‘location of recipient of services’ are most relevant to determine the nature of supply – whether intra-State or inter-State. The provisions to determine the LS and LR are explained below.

A2.2 The ‘location of the supplier of services’ [Section 2(15) of IGST Act] is to be determined by applying the following 4 rules in seriatim.

S. 2(15)	Supply made from	LS
(i)	Registered Place of Business (“PoB”)	Registered PoB (See Note 1)
(ii)	Fixed Establishment (“FE”) other than Registered PoB	FE (See Note 2)
(iii)	More than one establishment, whether PoB or FE	Location of establishment most directly concerned with the provision of supply
(iv)	In absence of PoB or FE	Usual Place of Residence [See Note 3]

Notes:

1. Place of business includes
   • Place from where business ordinarily carried on and includes warehouse, godown, any other place where goods are stored or goods/services are provided/ received
   • Place where Account books are maintained
   • Place where taxable person engaged in business through agent

   [Section 2(85) of CGST Act]

2. “Fixed establishment” means a place (other than the registered place of a business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for own needs. [Section 2(50) of CGST Act]. In a nutshell, three factors are determinative of a ‘fixed establishment’: (i) a place; (ii) people, (iii) with a degree of ‘permanence’ [the three PPPs like a three piece suit!]. The definition has almost all the attributes of a PoB. In fact, all FEs would be a PoB.
3. ‘usual place of residence’, means –
   1. In case of an individual, the place where he ordinarily resides;
   2. In other cases, the place where the person is incorporated or otherwise legally constituted. [Section 2(113) of CGST Act].

A2.3 The ‘location of the recipient of services’ [Section 2(14) of IGST Act] is to be determined by applying the following 4 rules in seriatim.

S. 2(14)	Supply is received at	LR
(i)	Registered Place of Business	Registered PoB [Refer Note 1 to Para A2.2]
(ii)	Fixed Establishment (“FE”) other than Registered PoB	FE [Refer Note 2 to Para A2.2]
(iii)	More than one establishment, whether PoB or FE	Location of establishment most directly concerned with the receipt of supply
(iv)	In absence of PoB or FE	Usual Place of Residence [Refer Note 3 to Para A2.2]

A2.4 The following rules apply as to establishments:

1. Establishment outside India and Establishment in India are treated as separate persons [Clause (i) of Explanation 1 to Section 8 of IGST Act].
2. Establishment in a State/UT¹ and Establishment outside that State/UT are treated as separate persons [Clause (ii) of Explanation 1 to Section 8 of IGST Act]
3. A person carrying on business though a branch, agency or representational office in a territory shall be treated as having establishment in the territory [Explanation 2 to section 8 of IGST Act].
4. Where LS/PoS is in the territorial waters (12 nautical miles from Indian shores), the LS/PoS would be in the coastal State/UT where the nearest point of appropriate baseline is located [Section 9 of IGST Act].

Establishment most directly concerned in providing/receiving a supply

A2.5 The rules provide that where services are supplied/ received from more than one establishment, whether Place of Business or fixed establishment, the PoB/establishment most directly concerned with the supply/receipt of the service would be relevant. This provision is going to pose a Big Challenge. There will be several instances where the contract with the client will be with the Head Office but the Services may be provided from the several branches in different States. The client also may have several offices in different states, which are being serviced by the Service provider. The issue is what would the LS and LR qua the transaction – the contracting office or actual performing/ receiving office. WHO is providing service to WHOM and from WHERE? This will be the most crucial question to be answered. What will be the factors to be taken into account to arrive at a conclusion. This is an issue which is being pondered world over by all the nations having GST. But generally, it concerns cross-border transactions. However, in India, it would be relevant for Domestic Inter-State supply also. Each State may say that the supply is from their State. If it goes into litigation, the assessee cannot ask the two States to settle between themselves, but may have to pay the GST in one State and claim refund in another State if matter goes against him in an adjudicating forum – thus perhaps leaving the poor assessee in a SORRY STATE.

A2.6 In order to ascertain the ‘establishment more directly concerned in provision of supply’, the test adopted is to consider the significance of the activities performed by the establishments in question and the part they play in their contribution to the service supplied. [Chinese Channel (Hongkong) Ltd. vs. Commissioners of Customs and Excise (1998) Simon’s Tax Cases 347 (High Court of Justice – Queens Bench Division, UK)]. In this context when the erstwhile Place of Provision of Services Rules, 2012 were introduced, the CBEC’s Education Guide has given guidance as follows:

“This will depend on the facts and supporting documentation, specific to each case. The documentation will include the following:—

• the contract(s) between the service provider and receiver;
• where there are no written contracts, any written account (documents, e-mail etc.) between parties which sets out in detail their understanding of the oral contract;
• details of how the business fits into any larger corporate structure;
• the establishment whose staff is actually involved in the execution of the job;
• performance agreements (which may be indicative both of the substance and actual nature of work performed at a particular establishment).”

However, we are still left with the issue whether establishment in Contracting State or the establishment in the Performing State is more important to determine where is the LS or LR. In the author’s view, unless the context otherwise requires, the establishment contracting with the client may be more relevant.