Circular No. 242/36/2024-GST dated 31.12.2024
The circular addresses issues arising from the incorrect determination of the place of supply for taxable online services provided to unregistered recipients. It aims to ensure compliance with Section 12(2)(b) of the Integrated Goods and Services Tax (IGST) Act, 2017, and Rule 46 of the Central Goods and Services Tax (CGST) Rules, 2017.
Key Points
- Background
- Some suppliers incorrectly identify the location of the supplier as the place of supply instead of the recipient’s state, causing misallocation of tax revenues to incorrect states.
- This misinterpretation mainly affects online services provided directly or through electronic commerce operators
- Clarifications Provided
- Online Services Definition (Section 2(17), IGST Act): Includes services like advertising, cloud services, e-books, digital content, data storage, and online gaming (excluding money gaming).
- Place of Supply Rules (Section 12, IGST Act):
- For unregistered recipients:
- If the recipient’s address is available on record: The location of the recipient.
- If the address is unavailable: The location of the supplier.
- Invoice Requirements (Section 31, CGST Act & Rule 46, CGST Rules):
- Mandatory to mention the recipient’s state on invoices for online services supplied to unregistered recipients, regardless of supply value.
- Such state details will be deemed the address on record.
- Scope of Applicability
- Includes services such as:
- Subscription-based digital content (e.g., e-newspapers, OTT platforms).
- Online telecom services.
- Digital services through apps or platforms.
- All online supplies, including through independent electronic commerce operators, fall under these rules.
- Compliance Mechanism
- Suppliers must develop a system to collect and record the recipient’s state details before providing services.
- Non-compliance may lead to penalties under Section 122(3)(e) of the CGST Act.