Question

Following are facts of a case:
1- An individual having a GSTIN in Haryana, serving a foreign company for it`s business development & marketting activities in India, is raising a Tax Invoice with IGST charged stating India, Haryana as Place of Supply, since he is presuming the place of supply u/s 13(2) of IGST Act as that of location of supplier of services i.e. India, being understood to be falling under definition of intermediary u/s 2 of said act.
2- The individual providing such service needs to travel accross India and thereby incurs expenses for Hotel stay, air travel etc.

Below is a query: 1- Should the Indian service provider having location in Haryana be charging IGST or Should he be charging CGST and SGST. Since as per Section 7(3) of IGST Act, since the location of Supplier and Place of Supply of services u/s Section 13(2) of IGST Act are same i.e. Haryana, in that case a doubt comes that the supplier should charge CGST and SGST instead of IGST Act.
2- Can the foreign company paying IGST or CGST/SGST as the case may be, to Individual service provider in India claim benefit or ITC of said GST paid on invoice ?
3- The individual providing such service needs to travel across India and thereby incurs expenses for Hotel stay, air travel etc. Hotels generally charge CGST and SGST on their bills. Again, as per Section 12(3)(b) of IGST Act, the place of supply for Hotels would be the place where the said immovable property is situated. Therefore, both location and place of supply of service would be in same state, hence hotel would not charge IGST. Whether the GST paid on Hotel bills, air travel outside the home state would be eligible for ITC in home state or not ? If not, the reasonings, as it was understood that GST would be one nation one tax regime, which was understood to eradicate tax overlapping as in case of CST charged in erstwhile taxation regime.
4- Whereas, if the above contention is validated that GST paid on hotel bills or similar over the counter bills outside the home state, would not be allowed in home state output tax liability, even if the bill clearly shows the GSTIN of service recipient or buyer, In such a case, the concept of one nation one tax seems just a sham and not the truth. Expert views seeked: As GST was just not supposed to be a tool to subsume several taxes like excise, sale tax etc. in one tax, it was also supposed to eliminate overlapping of tax credits which was getting missed earlier due to decentralised taxation concepts. To make it worse, is it right to understand, that position for central taxes like excise, service tax credits was better earlier, as it was centralised and credit was available all across India. Moreover, no where in GST law, the concept of erstwhile Input Service Distributor is observed, which could pass on the tax credits across the states.
5- CGST Portion charged in different state: Can CGST portion paid in Hotel bills outside Home state also not be claimed in ITC in home state output tax liability, since that was supposed to be central tax representing service tax, excise as in erstwhile taxation, for which credit was allowed all across India. If not, kindly guide with reasonings in that regard.

Answer

1. Classification of Outward supply

Since the location of receiver is outside India, so it is subjected to IGST. But you should go through section 13(2) to section 13(13) of IGST Act and assure that you have rightly selected the residuary clause for deciding the Place of Supply.

If Place of Supply is outside India then check whether you can get benefit of Export of service if the condition given in section 2(6) of IGST Act are duly fulfilled. Same are reproduced below:
'export of services' means the supply of any service when,''
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8

2. Availability of ITC to Foreign Buyer
It is Export of service subject to zero rate. You can claim refund of ITC also.

But If it is not Export of service, IGST will be charged and foreign buyer will not get ITC because he is not registered in GST.

3. ITC of Hotel expenses

The Hotel attract CGST and SGST. The CGST and SGST of one state will not travel to other state. Suppose if the supplier is registered in Maharashtra and travel to some cities of Maharashtra as well as Gujarat then CGST and SGST paid to Hotels located in Maharashtra will be available but not of Gujarat.

We agree with your view that this is a major defect in Law. Large number of presentations are given at various platform to various Authorities. We expect some changes in near future.
 

(Reply dt. 16.06.2018)