Rate of IGST for Interstate services

[MANOHARAN ARUMUGAM]

Dear Experts,

We are a PAN India organization. All the import transactions are centralized at Chennai (Tamilnadu). Rate of IGST payable for the services availed/paid in TN for the state of Maharasta or other Union Territories (recipients of the services) is 18% However, some service providers argue that as their services are availed and charges are paid in Tamil Nadu, they will charge CGST 9% and SGST 9%. Is their argument is right? If so, what is the IGST rule?

Pl. explain.

A.Manoharan

[Ganeshan Kalyani]

Yes, Sir they are correct.

[Rajagopalan Ranganathan]

Sir,

According to Section 7 (1) & (2) of IGST Act, 2017-

(1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

shall be treated as a supply of goods in the course of inter-State trade or commerce.

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

According to Section 8 (1) of IGST Act, 2017 subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply:

Therefore if both supplier and recipient are located in the same state/union territory then such supply will be treated as intra-state supply. Hence the contention of the service providers whose services are availed and charges are paid in Tamil Nadu will be treated as intra-state supply and CGST and SGST are to be paid separately.

[Shilpi Jain]

In case IGST is wished to be charged in the vendor invoice, it is required that the supplier in TN bills to a GSTIN of recipient in another state.

So if the vendor bills any location other Than TN, IGST can be charged.

Payment location is of no relevance to determine type of tax

[Ganeshan Kalyani]

I agree with the views of Ms. Shilpi Mam. IGST or CGST+SGST is not based on payment to supplier. Payment can be made by H.O. and supply can be received by any of its branch office. In simple terms if supplier and buyer State is same then CGST+SGST is to be levied and if the states are different then IGST is applicable.

[MANOHARAN ARUMUGAM]

Thank you sir and Madam,

The services are availed in tamilnadu by the branch office in tamilnadu for and on behalf of its Maharastra recipient since the goods ultimately being despatched to Maharastra only.Here the apprehension of the service provider is that Tamilnadu government may issue demand notice on the service provider who has collected the taxes for depriving of their share of SGST revenue. Is it so. I want to know the legal position please .

Thanks,

[KASTURI SETHI]

In my view, in this scenario, IGST is applicable.

Otherwise also, IGST is shared by Central Govt. and State Govt. No risk for issuance of Show Cause Notice by State Govt (SGST Office).

As per SGST Act, a separate SCN can be issued by SGST Act, if due tax towards State is not paid.

If Central Govt. has commenced investigation against an assessee, State Govt. cannot interfere.

AI Summary

Inter-state supply: IGST applies where supplier and recipient are in different states; intra-state attracts CGST and SGST. Where supplier and recipient are in different States or Union territories the supply is an inter state supply and IGST applies; where both are in the same State or Union territory it is an intra state supply and CGST plus SGST apply. Payment location or which office makes payment does not determine tax treatment; the invoice and the GST registration/location of the recipient govern whether IGST may be charged.