The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 242/36/2024-GST to address concerns regarding the correct declaration of the place of supply for online services provided to unregistered recipients. This clarification aims to ensure uniformity in the implementation of GST provisions across various field formations.
Background
Field formations have reported instances of non-compliance with the mandatory recording of the correct place of supply on invoices for online services provided to unregistered recipients. This issue arises from the misinterpretation of Section 12(2)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) and Rule 46 of the Central Goods and Services Rules, 2017 (CGST Rules).
Key Provisions
- Definition of Online Services:
- Online information and database access or retrieval services (OIDAR) include services delivered via the internet or electronic networks, such as online advertising, cloud services, e-books, digital content, and online gaming (excluding online money gaming).
- Electronic Commerce:
- Defined under Section 2(44) of the CGST Act as the supply of goods or services over digital or electronic networks.
- Electronic commerce operators are those who manage digital or electronic platforms for such commerce.
- Place of Supply:
- For services provided to registered persons, the place of supply is the recipient’s location.
- For unregistered recipients, if the recipient’s address is available, the place of supply is the recipient’s location; otherwise, it is the supplier’s location.
- Invoice Requirements:
- Rule 46 of the CGST Rules mandates that invoices for online services to unregistered recipients must include the recipient’s state name, which is deemed the address on record.
Clarifications Issued
- Mandatory State Name Recording:
- Suppliers of online services, including OIDAR and online money gaming, must record the recipient’s state name on invoices, regardless of the supply value.
- This ensures the correct determination of the place of supply as the recipient’s location.
- Applicability:
- The provisions apply to all online services supplied to unregistered recipients, such as e-newspapers, OTT subscriptions, online telecom services, and digital services via mobile apps.
- Compliance Mechanism:
- Suppliers must devise mechanisms to collect the recipient’s state details before supplying services.
- Failure to comply with these invoicing requirements may result in penal action under Section 122(3)(e) of the CGST Act.
Conclusion
This circular aims to streamline the GST compliance process for online service providers and ensure the correct flow of revenue to the appropriate states. Suppliers are urged to adhere to these guidelines to avoid penalties and ensure smooth operations.
For further details, refer to the full text of Circular No. 242/36/2024-GST issued by the CBIC.
