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Circular No. 203/15/2023 – GST: Place of Supply Clarified

by Shakshi Bharti | Nov 8, 2023 | GST, 2023 Circulars, Circulars, Circulars CGST 2023 | 0 comments

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Important Keyword: Circular No. 203/15/2023-GST, Place of Supply GST, GST Place of Supply Clarification, Transportation of Goods GST, Courier Services GST, Advertising Services GST, Billboard GST Place of Supply, Co-location Services GST, Data Centre GST, Section 12 IGST Act, Section 13 IGST Act, IGST Place of Supply Rules, CBIC Circular 203/15/2023, GST Logistics Services,

Words: 3013 Read time: 16 minutes.

F. No. 20/06/22/2023-GST-CBEC
Government of India Ministry of Finance Department of Revenue
Central Board of Indirect Taxes & Customs, GST Policy Wing
*****

New Delhi, dated the 27^th October, 2023

Circular No. 203/15/2023 - GST: Clarification Regarding Determination of Place of Supply in Various Cases

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification regarding determination of place of supply in various cases-reg.

Representations have been received from the trade and field formations seeking clarification on certain issues with respect to determination of place of supply in case of –

supply of service of transportation of goods, including through mail and courier;
supply of services in respect of advertising sector; and
supply of the “co-location services”

In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues as under:

A. Place of supply in case of supply of service of transportation of goods, including through mail and courier

Issue:

Sub-section (9) of section 13 of Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as “IGST Act”) has been omitted vide section 162 of Finance Act, 2023 which will come into effect from 01.10.2023. After the said amendment, doubts have been raised as to whether the place of supply in case of service of transportation of goods, including through mail and courier, in cases where location of supplier of services or location of recipient of services is outside India, will be determined as per sub-section (2) of section 13 of IGST Act or will be determined as per sub-section (3) of section 13 of IGST Act.

Clarification:

1.1 Place of supply of services where location of supplier or location of recipient is outside India is determined as per section 13 of the IGST Act. Sub- Section (9) of section 13 of IGST Act provided that where one of the supplier of the services or the recipient of services is located outside India, the place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. The said sub-section has been omitted vide section 162 of Finance Act, 2023 which will come into effect from 01.10.2023. It is hereby clarified that after the said amendment comes into effect, the place of supply of services of transportation of goods, other than through mail and courier, in cases where location of supplier of services or location of recipient of services is outside India, will be determined by the default rule under section 13(2) of IGST Act and not as performance-based services under sub-section (3) of section 13 of IGST Act. Accordingly, in cases where location of recipient of services is available, the place of supply of such services shall be the location of recipient of services and in cases where location of recipient of services is not available in the ordinary course of business, the place of supply shall be the location of supplier of services.
1.2 Further, it is also mentioned that the place of supply in case of service of transportation of goods by mail or courier was not covered under the provisions of sub-section (9) of section 13 before the said sub-section was amended/ omitted. Therefore, on the same principles as mentioned above, the place of supply in case of service of transportation of goods by mail or courier will continue to be determined by the default rule under section 13(2) of IGST Act i.e. in cases where location of recipient of services is available, the place of supply of such services shall be the location of recipient of services and in cases where location of recipient of services is not available in the ordinary course of business, the place of supply shall be the location of supplier of services.

B. Place of supply in case of supply of services in respect of advertising sector

Issue:

Advertising companies are often involved in procuring space on hoardings/ billboards erected and mounted on buildings/land, in different States, from various suppliers (“vendors”) for providing advertisement services to its corporate clients. There may be variety of arrangements between the advertising company and its vendors as below:

There may be a case wherein there is supply (sale) of space or supply (sale) of rights to use the space on the hoarding/ structure (immovable property) belonging to vendor to the client/advertising company for display of their advertisement on the said hoarding/ structure. What will be the place of supply of services provided by the vendor to the advertising company in such case?
There may be another case where the advertising company wants to display its advertisement on hoardings/ billboards at a specific location availing the services of a vendor. The responsibility of arranging the hoardings/ billboards lies with the vendor who may himself own such structure or may be taking it on rent or rights to use basis from another person. The vendor is responsible for display of the advertisement of the advertisement company at the said location. During this entire time of display of the advertisement, the vendor is in possession of the hoarding/structure at the said location on which advertisement is displayed and the advertising company is not occupying the space or the structure. In this case, what will be the place of supply of such services provided by the vendor to the advertising company?

Clarification:

2.1 It is clarified that the place of supply in the case supply of services in respect of advertising sector, in the cases referred in (i) and (ii), shall be determined as below:
2.2 Place of supply in Case (i): The hoarding/structure erected on the land should be considered as immovable structure or fixture as it has been embedded in earth. Further, place of supply of any service provided by way of supply (sale) of space on an immovable property or grant of rights to use an immovable property shall be governed by the provisions of section 12(3)(a) of IGST Act. As per section 12(3)(a) of IGST Act, the place of supply of services directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work shall be the location at which the immovable property is located. Therefore, the place of supply of service provided by way of supply of sale of space on hoarding/ structure for advertising or for grant of rights to use the hoarding/ structure for advertising in this case would be the location where such hoarding/ structure is located.
2.3 Place of supply in Case (ii): In this case, as the service is being provided by the vendor to the advertising company and there is no supply (sale) of space/ supply (sale) of rights to use the space on hoarding/structure (immovable property) by the vendor to the advertising company for display of their advertisement on the said display board/structure, the said service does not amount to sale of advertising space or supply by way of grant of rights to use immovable property. Accordingly, the place of supply of the same shall not be covered under section 12(3)(a) of IGST Act. Vendor is in fact providing advertisement services by providing visibility to an advertising company’s advertisement for a specific period of time on his structure possessed/taken on rent by him at the specified location. Therefore, such services provided by the Vendor to advertising company are purely in the nature of advertisement services in respect of which Place of Supply shall be determined in terms of Section 12(2) of IGST Act.

C. Place of supply in case of supply of the “co-location services”

Issue:

Co-location is a data center facility in which a business/company can rent space for its own servers and other computing hardware along with various other bundled services related to Hosting and information technology (IT) infrastructure.
A business/company who avails the co- location services primarily seek security and upkeep of its server/s, storage and network hardware; operating systems, system software and may require interacting with the system through a web- based interface for the hosting of its websites or other applications and operation of the servers.

In this respect, various doubts have been raised as to

whether supply of co-location services is renting of immovable property service (as it involves renting of space for keeping/storing company’s hardware/servers) and hence the place of supply of such services is to be determined in terms of provision of clause (a) of sub- section (3) of Section 12 of the IGST Act which is the location where the immovable property is located; or
whether the place of supply of such services is to be determined by the default place of supply provision under sub-section (2) of section 12 of the IGST Act as the supply of service is Hosting and Information Technology (IT) Infrastructure Provisioning services involving providing services of hosting the servers and related hardware, security of the said hardware, air conditioning, uninterrupted power supply, fire protection system, network connectivity, backup facility, firewall services, 24 hrs. monitoring and surveillance service for ensuring continuous operations of the servers and related hardware, etc.

Clarification:

3.1 It is clarified that the Co-location services are in the nature of “Hosting and information technology (IT) infrastructure provisioning services” (S.No. 3 of Explanatory notes of SAC- 998315). Such services do not appear to be limited to the passive activity of making immovable property available to a customer as the arrangement of the supply of colocation services not only involves providing of a physical space for server/network hardware along with air conditioning, security service, fire protection system and power supply but it also involves the supply of various services by the supplier related to hosting and information technology infrastructure services like network connectivity, backup facility, firewall services, and monitoring and surveillance service for ensuring continuous operations of the servers and related hardware, etc. which are essential for the recipient business/company to interact with the system through a web based interface relating to the hosting and operation of the servers.
3.2 In such cases, supply of colocation services cannot be considered as the services of supply of renting of immovable property. Therefore, the place of supply of the colocation services shall not be determined by the provisions of clause (a) of sub-section (3) of Section 12 of the IGST Act but the same shall be determined by the default place of supply provision under sub-section (2) of Section 12 of the IGST Act i.e. location of recipient of co-location service.
3.3However, in cases where the agreement between the supplier and the recipient is restricted to providing physical space on rent along with basic infrastructure, without components of Hosting and Information Technology (IT) Infrastructure Provisioning services and the further responsibility of upkeep, running, monitoring and surveillance, etc. of the servers and related hardware is of recipient of services only, then the said supply of services shall be considered as the supply of the service of renting of immovable property. Accordingly, the place of supply of these services shall be determined by the provisions of clause (a) of sub-section (3) of Section 12 of the IGST Act which is the location where the immovable property is located.

Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow.

(Sanjay Mangal)
Principal Commissioner (GST)

📚 Frequently Asked Questions (FAQs): Circular No. 203/15/2023 - GST

Q1. What is Circular No. 203/15/2023-GST?

Answer:
Circular No. 203/15/2023-GST clarifies the determination of the place of supply for three important categories of services under the IGST Act: transportation of goods (including mail and courier), advertising services, and co-location services. The circular was issued to resolve differing interpretations among taxpayers and GST officers and to ensure uniform implementation of the law across India.

Q2. How is the place of supply determined for transportation of goods when one party is located outside India?

Answer:
From 1 October 2023, after the omission of Section 13(9) of the IGST Act, the place of supply for transportation of goods (other than the earlier special provision) is determined under the default rule in Section 13(2).
In simple terms, if the recipient's location is available, that location becomes the place of supply. If it is not available in the ordinary course of business, the supplier's location becomes the place of supply. This clarification also applies to transportation through mail and courier.

Q3. Does the same place of supply rule apply to courier and mail services?

Answer:
Yes. The circular confirms that transportation of goods through mail or courier also follows the default rule under Section 13(2) of the IGST Act.
Many businesses actually face this issue while dealing with international courier services. The place of supply will be the recipient's location where available, or the supplier's location if the recipient's location is not available in the ordinary course of business.

Q4. What is the place of supply when an advertising company purchases advertising space on a billboard?

Answer:
If the vendor supplies or grants the right to use advertising space on a billboard or hoarding, the service is directly related to immovable property.
Accordingly, the place of supply is determined under Section 12(3)(a) of the IGST Act, which means the place of supply is the location where the billboard or hoarding is situated. This applies because the transaction involves granting rights over immovable property.

Q5. What if the vendor only displays advertisements without transferring any right to use the advertising space?

Answer:
In such cases, the vendor is not supplying advertising space but is instead providing advertising services.
Let’s understand this with an example. Suppose an advertising agency hires a vendor to display advertisements on the vendor's own hoardings for one month. Since no right over the space is transferred, the place of supply is determined under the general rule in Section 12(2) of the IGST Act and not under the immovable property provisions.

Q6. What are co-location services under GST?

Answer:
Co-location services allow businesses to keep their servers and IT hardware in a professionally managed data centre along with services such as power supply, cooling, network connectivity, security, firewall protection, monitoring, and backup facilities.
If you look at it practically, businesses are not merely renting physical space—they are receiving a bundled IT infrastructure service. Therefore, such services are generally treated as hosting and IT infrastructure provisioning services rather than renting of immovable property.

Q7. How is the place of supply determined for co-location services?

Answer:
Where the supplier provides a complete package including hosting, monitoring, uninterrupted power supply, network connectivity, security, backup, and other IT infrastructure services, the place of supply is determined under Section 12(2) of the IGST Act.
This means the place of supply is the location of the recipient of the service, because the service is not considered renting of immovable property.

Q8. When will co-location services be treated as renting of immovable property?

Answer:
The circular provides an important exception.
If the supplier merely rents physical space with basic infrastructure and the customer is entirely responsible for operating, maintaining, monitoring, and securing its own servers, the arrangement is treated as renting of immovable property. In that case, the place of supply is determined under Section 12(3)(a) and will be the location of the property itself.

Q9. Why is this circular important for businesses?

Answer:
This circular removes ambiguity in three sectors that frequently faced GST disputes—logistics, advertising, and data centre services.
Many businesses actually struggled to determine whether a transaction related to immovable property or was simply a service covered by the general place of supply provisions. The clarification helps taxpayers classify transactions correctly and reduces litigation arising from differing interpretations.
Related Resource:
GST Compliance: https://finodha.in/gst-compliance/

Q10. Does this circular amend the IGST Act?

Answer:
No. Circular No. 203/15/2023-GST is purely clarificatory.
It does not amend Sections 12 or 13 of the IGST Act. Instead, it explains how these provisions should be interpreted in specific situations involving transportation services, advertising transactions, and co-location services to ensure consistent implementation by GST officers throughout India.