Place of supply rules are crucial for taxation of services under the goods and services (GST) regime.
In case of services delivered overseas from India or from outside the country, the Central Board of Indirect Taxes and Customs (CBIC) said the place of supply will be the location of the recipient, if the location is known.
In case the recipient’s location is not readily available in the regular course of business, the place of supply will be the service provider’s location. The same principle will be applied to services provided by courier or mail.
The clarification follows the GST Council‘s decisions at its last meeting on October 7. CBIC clarified that the place of supply in the case of co-location services should be the location of the recipient.
Co-location refers to businesses renting space to place their servers and other computing hardware in close proximity to various other bundled services related to hosting and information technology infrastructure, such as stock exchanges in order to ensure speed of execution.In cases where the agreement between the supplier and the recipient only involves renting physical space along with basic infrastructure and the recipient is solely responsible for the upkeep, operation, monitoring, and surveillance of servers and related hardware, these services will be considered as the rental of immovable property, the notification said. In such instances, the place of supply will be the location of this property.
When co-location services include providing physical space for server network hardware, including air conditioning, security, fire protection, and power supply, the place of supply will be the location of the recipient of the co-location service.
In case of supply of services involving sale of space on a billboard or structure for advertising or granting rights to use such advertising space, the place of supply will be the location where that hoarding or structure is situated.
“The clarifications issued by CBIC address the confusion that had persisted for a long time,” said Saurabh Agarwal, tax partner, EY. “For co-location, the decision is crucial from the point that exports remain zero-rated even when data centre facilities are situated in India.”
