CBIC clarifies on the entitlement of input tax credit where the place of supply of services by way of transportation of goods is in India

The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification on the entitlement of input tax credit (ITC) where the place of supply of services by way of transportation of goods, including by mail or courier, and where location of the supplier as well as the recipient of services is in India.  This clarification was issued on 27^th  December, 2022.

The following clarifications have been advanced:

Scenario: In case of a supply of services by way of transportation of goods:

•  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.
• Where such transportation includes by mail or courier

1. what would be the place of supply of services in the above scenario?

Clarification 1: In the above scenario, the place of supply is the concerned foreign destination where the goods are being transported.

2. In the above scenario, whether the supply of services will be inter-State supply or intra-State supply?

Clarification 2: The supply of services will be considered as inter-State 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.

3. In the above scenario, whether the recipient of the service of transportation of goods would be eligible to avail of input tax credit in respect of the said input service of transportation of goods?

Clarification 3: There is no restriction on the benefit of input tax credit by the recipient located in India if the place of supply of the said input service is outside India. Thus, the recipient of the service of transportation of goods shall be eligible to avail of input tax credit in respect of the IGST so charged by the supplier, subject to the fulfilment of other conditions laid down in the Central Goods and Services Tax Act, 2017 (CGST).

4. what state code has to be mentioned by the supplier of the said service of transportation of goods, where the transportation of goods is to a place outside India while reporting the said supply in FORM GSTR-1?

Clarification 4: The supplier of service shall report the place of supply of such service by selecting the State code as ‘96-Foreign Country’ from the list of codes in the drop-down menu available on the portal in FORM GSTR-1.