India GST on services

Thu 17th Sep 2015

As India continues to debate its implementation of a Goods & Services Tax (GST) to replace its VAT regime, guidance has been provided on the place of supply rules for services.

The place of supply refers to where a taxable supply is subject to VAT. When goods or services are provided across state of country borders, it is important for both the seller and their customer to understand these rules, and that they properly accrue and pay any VAT due in their respect VAT or GST returns.

India GST destination principle

India has opted to follow the destination principle on services, following accepted OECD guidance as well as the EU VAT model. This means the place of supply – where the GST or VAT is due – is where the customer consumes the services. This is based on the Place of Services Rules, issued by the Centre.

Under the current Indian VAT regime, services are taxed by the Centre only. Under the proposed GST system, taxing services will switch to the local states when the supply is consumed on their territory.