Clarifications on availability of input tax credit for transportation of goods to a place outside India under GST
Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No.184 dated 27th December, 2022 to clarify on entitlement of Input Tax Credit (ITC) where place of supply is determined in terms of proviso to Section 12(8)# of Integrated Goods and Services Tax (IGST) Act, 2017.
Key points of the Circular are:
1. In case of supply of services by way of transportation of goods, including by mail or courier, where the transportation of goods is to a place outside India, and where the supplier and recipient of the said supply of services are located in India, the place of supply is the concerned foreign destination where the goods are being transported.
For Example: X is a person registered under GST in the state of West Bengal who intends to export goods to a person Y located in Singapore. X avails the services for transportation of goods by air to Singapore from an air cargo operator Z, who is also registered under GST in the state of West Bengal. In this case, the place of supply of the services provided by Z to X is the place of destination of goods i.e., Singapore, in terms of the proviso to Section 12(8) of IGST Act.
2. The aforesaid supply of services would be considered as inter-State supply since the location of the supplier is in India and the place of supply is outside India. Therefore, integrated tax (IGST) would be chargeable on the said supply of services.
In respect of the illustration given in Sl. No. 1. above, Z would charge IGST from X, for supply of services by way of transportation of goods.
3. The recipient of service of transportation of goods shall be eligible to avail input tax credit in respect of the IGST so charged by the supplier, subject to the fulfilment of other conditions laid down in Section 16 of the CGST Act,2017 relating to eligibility and conditions for taking input tax credit and Section 17 of the CGST Act,2017 relating to apportionment of credit and blocked credits.
In respect of the illustration given in Sl. No. 1. above, X would be eligible to take input tax credit of IGST in respect of supply of services received by him from Z, subject to the fulfilment of other conditions laid down in section 16 and 17 of the CGST Act,2017.
4. The supplier of service shall report place of supply of such service by selecting State code as ‘96- Foreign Country’ from the list of codes in the dropdown menu available in FORM GSTR-1.
# Section 12(8) of the IGST Act, 2017 read as follows:
The place of supply of services by way of transportation of goods, including by mail or courier to,–
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.
Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods.
