Clarification on the entitlement of input tax credit which provides for the place of supply of services by way of transportation of goods, including by mail or courier

Clarification 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

The CBIC vide Circular No. 184/16/2022-GST  has issued a clarification 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.

Attention  is  invited  to  sub-section  (8)  of  section  12  of Integrated  Goods and  Services Tax Act, 2017 (hereinafter referred to as “IGST Act”)which provides for the place of supply of services by way of transportation of goods, including by mail or courier, where location of the supplier as well as the recipient of services is in  India. As per clause  (a) of the  aforesaid sub-section, the place of supply of services by way of transportation of goods, including by mail or courier,  to  a  registered  person  shall be  the  location  of  such  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 that 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. In such cases, 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, doubts are being raised regarding the availability of input tax credit of the said services to the recipient located in India.

2.  In  order  to  clarify  this  issue  and  to  ensure  uniformity  in  the  implementation  of  the provisions of law across the field formations, the Board, in exercise of its powers conferred by section  168  (1)  of  the  Central  Goods  and  Services  Tax  Act,  2017  (hereinafter  referred  to  as “CGST Act”), hereby clarifies the issues as under:

S. No.	Scenario	Clarification
1.	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  sub-section  (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. Illustration: X  is  a  person  registered  under  GST  in  the state  of  West  Bengal  who  intends  to  export goods  to  a  person  Y  located  in  Singapore.  X avails the services for transportation of goods by   air   to   Singapore   from   an   air   cargo operator Z, who is also registered under GST in the state of West Bengal In this case, the place of supply of the services provided by Z to X is the place of destination of   goods   i.e.,   Singapore,   in   terms   of   the proviso  to  sub-section  (8)  of  section  12  of IGST Act.
2.	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  sub-section  (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
3.	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.
4.	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 drop-down   menu   available   on   the   portal   in FORM GSTR-1.

3.It  is  requested  that  suitable  trade  notices  may  be  issued  to  publicize  the  contents  of  this Circular.

4.Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow

cir-184-16-2022-cgst

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