CBIC’s Clarification on place of supply for software/design services related to electronics semi-conductor

Central Board of Indirect Taxes and Customs (CBIC) in its circular dated 11^th October 2019, has issued clarification on determination of place of supply in case of software/design services related to Electronics Semi-conductor and Design Manufacturing (ESDM) industry.

CBIC has clarified the following:

1. Contracts where service provider is involved in a composite supply of software development and design for integrated circuits electronically, Chip design/software development is the principal supply of the service provider. Testing of software on sample prototype hardware is often an ancillary supply as the service provider is not involved in software testing alone as a separate service and it is aimed at improving the quality of software/design. CBIC has clarified that the entire activity needs to be viewed as one supply.
2. The place of supply in such cases shall be the location of the service recipient in terms of Section 13(2) of the IGST Act. 
3. Provisions of Section 13(3)(a) of IGST Act, 2017 will not apply separately for determining the place of supply for ancillary supply in such cases.

Click here to see circular.