CBIC clarification on ITC Eligibility and Place of supply under IGST: GST Circular 184/16/2022

CBIC clarification on eligibility to claim ITC by the recipient of service located in India, in respect of services provided during transportation of goods outside India, where the place of supply is determined under proviso to Section 12(8) of the IGST Act, 2017.

CBIC has clarified that in case of supply of goods to a place outside India, the place of supply of such transportation service shall also be the place of destination of such goods.

In such cases, as the place of supply of services, as per the proviso to Section 12(8) of IGST Act is the concerned foreign destination and not the State where the recipient is registered under GST, the recipient of the said services 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,2017.

CBIC GST Circular 184/16/2022 dt. 27/12/2022: CBIC clarification on Eligibility to claim ITC where the place of supply is determined under proviso to Section 12(8) of the IGST, 2017.

Section 12(8) of the IGST Act specifies the place of supply of services via goods transportation, such as mail or courier, when both the supplier and the recipient of services are in India. According to Section 12(8)(a) of the IGST Act, the place of supply of services by way of transportation of goods to a registered person, including by mail or courier, shall be such registered person’s location. However, a proviso to Section 12(8) of the IGST Act, inserted by the IGST Amendment Act, 2018 and effective as of 01/02/2019, provides that where goods are transported to a location outside India, the place of supply of the said service shall be the location of such goods.

In such cases, concerns have been raised about the availability of input tax credit for the said services to the recipient located in India, because the place of supply of services, according to proviso Section 12(8) of the IGST Act, is the concerned foreign destination, not the State where the recipient of services is registered under GST.

To clarify this issue and ensure uniformity in the implementation of GST law provisions, the CBIC has clarified the following issues in exercise of its powers conferred by section 168(1) of the CGST Act, 2017:

1. What is the place of supply of the services in the 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 the supplier and recipient of the said supply of services are both located in India?

In the case of a supply of services by way of goods transportation, including by mail or courier, and where the supplier and recipient of the said supply of services are both located in India, the place of supply shall be the concerned foreign destination, where the goods are being transported, according to the proviso to Section 12(8) of the IGST Act.

2. In such a case, will the provision of services be classified as inter-state or intra-state?

Because the supplier is in India and the place of supply is outside India, such a supply of services would be considered inter-State under section 7(5) of the IGST Act. As a result, IGST would be levied on the aforementioned supply of services.

3. Is it possible for the recipient of such service of transportation of goods outside India to claim input tax credit?

Section 16 of the CGST Act 2017 specifies the eligibility and conditions for claiming input tax credit, whereas Section 17 specifies the apportionment of credit and blocked credits in certain circumstances. The said provisions of law do not preclude a recipient in India from claiming input tax credit if the place of supply of the said input service is outside India. Thus, the recipient of a transportation service shall be eligible to claim input tax credit for the IGST charged by the supplier, subject to the fulfilment of the other conditions set out in sections 16 and 17.

4. What state code must be mentioned by the supplier of the said service of transportation of goods, where the transportation of goods is to a location outside India, when reporting the said supply in FORM GSTR-1?

The service provider must report the location of the service by selecting ’96- Foreign Country’ from the list of codes in the dropdown menu available on the portal in FORM GSTR-1.