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CBIC Clarification on ITC where place of supply is determined

The Central Board of Indirect Taxes & Customs (CBIC) has released a clarification recently on the entitlement of input tax credit where the place of supply is determined in terms of the proviso to sub-section (8) of Section 12 of the Integrated Goods and Services Tax Act 2017.

On 27th December, Tuesday 2022, the clarification was introduced in Circular No. 184/16/2022-GST. Let us discuss in detail as to what clarification on Input Tax Credit has been introduced by the CBIC department.

So, the proviso to sub-section (8) of Section 12 of the Integrated Goods and Services Tax Act 2017 talks about the place of supply of services by way of transportation of goods including mail or courier where location of the supplier as well as that of recipient of services is in India.

As per clause (s) of the aforesaid sub-section, the place of supply of services by way of transportation of goods including mail or courier to a registered person. However, the proviso to the aforesaid sub-section which was inserted vide the Integrated Goods and Services Tax) Amendment Act 2018 w.e.f. 01.02.2019 provides where the transportation of goods is to a place outside India, the place of supply of the said service shall be the place of destination of such goods.

So, in such case, as the place of supply of services, as per the proviso to sub-section (8) of Section 12 of IGST Act, is the concerned foreign destination and not the State where the recipient is registered under GST, issues, and doubts are raised by many regarding the availability of input tax credit (ITC) of the said services to the recipient located in India.

For providing relaxation and also to ensure uniformity, the clarification has been issued by the Central Board of Indirect Taxes and Customs (CBIC) which is given as under:-

Here is the table illustrating the issue as well as the solution to it. Do read and know the clarifications

IssueClarification
In case of supply of services by way of transportation of goods, including by mail or courier, where the transportation of goods is to a place outside India, and where the supplier and recipient of the said supply of services are located in India, what would be the place of supply of the said services?The place of supply of services by way of

transportation of goods, including by mail or

courier, where both the supplier and the recipient

are located in India, is determined in terms of subsection (8) of section 12 of the IGST Act which

reads as follows:

“(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:

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”

Hence, in case of supply of services by way of transportation of goods, including by mail or courier, where the transportation of goods is to a place outside India, and where the supplier and recipient of the said supply of services are located in India, the place of supply is the concerned foreign destination where the goods are being transported, in accordance with the proviso to the sub-section (8) of section 12 of IGST Act, which was inserted vide the Integrated Goods and Services Tax (Amendment) Act, 2018 w.e.f. 01.02.2019.

IssueClarification
In the case given in Sl. No. 1, whether the supply of services will be treated as inter-State supply or intra-State supply?The aforesaid supply of services would be

considered as inter-State supply in terms of subsection (5) of section 7 of the IGST Act since the location of the supplier is in India and the place of supply is outside India. Therefore, integrated tax (IGST) would be chargeable on the said supply of services.

 

In respect of the illustration given in Sl. No. 1.

above, Z would charge IGST from X in terms of

sub-section (5) of section 7 of the IGST Act, for

supply of services by way of transportation of

goods.

In the case given in Sl. No. 1, whether the recipient of service of transportation of goods would be eligible to avail input tax credit in respect of the said input service of transportation of goods?Section 16 of the CGST Act lays down the

eligibility and conditions for taking input tax credit

whereas, section 17 of the CGST Act provides for

apportionment of credit and blocked credits under

circumstances specified therein. The said

provisions of law do not restrict availment of input

tax credit by the recipient located in India if the

place of supply of the said input service is outside

India. Thus, the recipient of service of

transportation of goods shall be eligible to avail

input tax credit in respect of the IGST so charged

by the supplier, subject to the fulfilment of other

conditions laid down in section 16 and 17 of the

CGST Act.

In the illustration given in Sl. No. 1 above, X would

be eligible to take input tax credit of IGST in

respect of supply of services received by him from

Z, subject to the fulfilment of other conditions laid

down in section 16 and 17 of the CGST Act.

In the case mentioned at Sl. No. 1, what state code has to be mentioned by the supplier of the said service of transportation of goods, where the transportation of goods is to a place outside India, while reporting the said supply in FORM GSTR-1?The supplier of service shall report place of supply of such service by selecting State code as ‘96- Foreign Country’ from the list of codes in the dropdown menu available on the portal in FORM GSTR-1.

In addition to this, it is requested that suitable trade notices may be issued to publicize the contents of this Circular.

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All in all, this was all about the clarification by CBIC made on Input Tax Credit where the place of supply is determined. in terms of the proviso to sub-section (8) of Section 12 of the Integrated Goods and Services Tax Act 2017.

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