LET’S DECODE THE BASICS OF PLACE OF SUPPLY UNDER SECTION 13 OF THE IGST ACT:
- Location of the recipient must be outside India
- Consideration must be received in convertible foreign exchange (or INR where permitted)
- Supplier and recipient must not merely be establishments of the same entity
- The service must qualify under one of the defined POS rules (ex: Sec 13(2), 13(3), 13(8))
COMMON GREY AREAS:
- Inter-company support services - Is the recipient really outside India or just another branch?
- Legal services billed to a foreign parent but used in India - POS could still be India!
- SaaS products or cloud-based tools – Check if location of use = location of recipient.
WHY IT MATTERS:
- Only “export of services” qualifies as zero-rated supply (no GST + refund of ITC)
- Wrong classification = 18% tax, potential penalties, and blocked refunds
- Increasing scrutiny from GST audit teams and DGAR