The circular provides clarifications regarding the place of supply for data hosting services provided by service providers located in India to cloud computing service providers located outside India. This is to address issues where some field formations were considering the place of supply as within India, thereby denying export benefits to these services.
Key Issues Addressed
- Intermediary Status of Data Hosting Service Providers
- Question: Whether data hosting service providers qualify as intermediaries between cloud computing service providers and their end customers as per Section 2(13) of the IGST Act.
- Clarification: Data hosting service providers are not intermediaries as they provide services on a principal-to-principal basis to cloud computing service providers. They do not facilitate the supply of services between cloud computing providers and their end users.
- Relation to Goods “Made Available” by Recipient
- Question: Whether data hosting services are provided in relation to goods “made available” by the recipient of services to the service provider, as per Section 13(3)(a) of the IGST Act.
- Clarification: Data hosting services are not considered to be provided in relation to goods made available by the recipient. The data hosting service provider owns and operates the necessary infrastructure independently.
- Relation to Immovable Property
- Question: Whether data hosting services are provided directly in relation to immovable property, as per Section 13(4) of the IGST Act.
- Clarification: Data hosting services are not directly related to immovable property. They involve comprehensive services related to data hosting, including infrastructure management, power supply, network connectivity, and security.
Determination of Place of Supply
- The place of supply for data hosting services provided by Indian service providers to overseas cloud computing service providers does not fit into any specific provisions of Sections 13(3) to 13(13) of the IGST Act. Therefore, the place of supply is determined as per the default provision under Section 13(2) of the IGST Act, which is the location of the recipient of the services. Since the recipient is located outside India, the place of supply is outside India.
Export of Services
- The supply of data hosting services to overseas cloud computing entities can be considered as an export of services, subject to the fulfilment of other conditions mentioned in Section 2(6) of the IGST Act.