place of supply rules in indian gst regime

info@consultconstruction.comwww.consultconstruction.com

Today’s Agenda by Consult Construction

Place of Supply Rules

– The OECD Model

• Consult Constrution– Specialises in handling Indirect Tax Issues– Taking trainings for corporates on regular basis– Written several articles and books affecting the construction and

project sector in India– Made several representations to the Ministry in India on Tax

related issues

Rule Framework under VAT

Time of SupplyValue of SupplyPlace of Supply

Evolving Framework

Many countries in the world do not have any place of supply rules

Globally VAT / GST is to be levied at the point of consumption

The place of supply will indicate the jurisdiction in which the supply will be VATable.

Lets look at Telecommunication

• Australia, - No GST on outbound nor inbound users. • Chile and India - Charge Tax on both inbound and outbound users. • Norway, Spain and the Netherlands - VAT only to outbound users. • Israel - a very complex method in which they only tax certain types of outbound

roaming. • Canada - users, who are outside their country, are taxed on calls they make to

users inside Canada, but are not taxed on calls they receive from Canada.• Austria and Slovenia do charge VAT on certain calls, but if these calls are taxed

and there is another country with a comparable VAT system that also charges VAT, the tax charges are redeemable

• The OECD is of the view that in order to ensure a fair and consistent VAT system all transactions should be taxed at the place of local consumption.

• Jurisdiction of Origin vs Destination– To achieve Neutrality– Equitable Distribution– Global Practise

Supply of Goods

Place where the goods are consumed Globally there are adequate border controls in place

GST Considerations:Drop Shipment

Coy A (Malaysia)

Customer(USA)

Coy B(Japan)

Delivery of Goods

Invoice @ USD10,000

Invoice @ USD6,000

Should Coy A (Malaysia) impose

GST on this invoice?

Is Coy B (Japan) required to be registered for GST in Malaysia?

GST Considerations:EPC Contracts – Supply and Installation of Goods

Coy A (Japan)

Customer(India)

Coy B(India)

Delivery of Goods and Supply of

Installation Services

Provide Installation or Construction Services

Sub-Contract for Installation or Construction Services

What are the GST issues?

Supply of Services

Place where the supplies are consumed No border controls can be placed

Rule to determine the place of supply of services• Need of a proxy

– Main Rule – Place of Customer’s Location• Onus on the supplier to prove the location

– Supply to a third party– Receipt of payment by a third party

– Specific Rule• Supplier’s Location• Place of effective use and enjoyment• Place of performance• Location of immovable property

• When should the specific rule be used– When it leads to significantly better result

• Neutrality• Certainty and Simplicity• Effectiveness• Fair• Ease of Administration

– But use of specific rule should be minimal

• When will the main rule fail

– Particular services supplied to both under B2B and B2C– Service requires physical presence of both supplier and

customer– Service is to be used at identified location

• Telecommunications• Concert / Events

• When will specific rule related to immovable property be desirable– Transfer / sale / lease / enjoyment of immovable property– Construction / maintenance of immovable property– Other supplies closely connected with immovable property say

architect services etc• All above should be clearly defined in the legislation

• Supply to Single Location Entity vs Supply to Multiple Location Entity– Recharge Method – Internal Allocation

• Method• Timing• Documentation• Right to get the credit• Assessment• Role of Auditors

B2B vs B2C• Why a need to distinguish

– Main rule may not apply to all– Concern under B2b is also to ensure pass through

of credit– B2c results in imposition of final tax burden– Identity of the customer not clear– Volume of Transactions– Reverse Charge can-not be applied– BEPS concern

Moot Question–How will the supplier come to know

whether it’s a B2B transaction or a B2C one

• B2C – Why a need to revisit the existing framework– Earlier rule – Supplier Location– Globalisation through internet– Place of performance not clear– Incentive to buyer to buy from external jurisdiction in many

countries say India

• B2C – Types– On the Spot – Track the Place of performance

• Performed at identifiable location• Consumed at the time of physical performance• Require everyone’s physical presence at same time and place

– Ex – Physiotherapy / Hotel / Cinema /

Same rules can be estd for B2B

– Others – Track the customer’s residence• Ex – Legal Advice / Renting of movable goods /

telecommunication / software / online games

• Determine jurisdiction of customer–Regularly resides i.e. home–Multiple sources to track –

• Bank Account• Address provided• Credit Card• Telephone Number• IP Address

• When supplier is not located in the jurisdiction of taxation–Registering in all jurisdictions–Reverse Charge–Thresholds

• Simplification proposed– Registration process – Minimum information / vernacular

language forms / complete verification online

– Input Tax Refunds– Returns – Simple /

– Payments– Invoicing– AgentsPrincipal of proportionality

Other Concepts Discussed:-

Mutual Co-operation amongst the VAT jurisdictions

Concept of Tax Avoidance – Legal arrangements

Concept of Tax Evasion - Hiding

Impact Areas for Businesses

Pricing, Costing, Margins

Supply-chain management

Change in IT Systems

Treatment of tax incentives – package scheme of incentives

Treatment of excluded sectors

Transition issues

Compliance

Professionals

Track GST development

Review draft legislations – identify likely issues –suggest solutions

Perform Impact Analysis

Assist industry in issue identification/advocacy

Pre and post -Implementation assistance

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