The CBIC has issued a clarification regarding the place of supply for data hosting services provided by Indian service providers to overseas cloud computing entities that the place of supply cannot be determined as per section 13(4) of the IGST ( Integrated Goods and Services Tax ) Act, 2017.
Section 13(4) of the IGST Act states that the place of supply for services directly related to immovable property is determined based on the location of the immovable property. This provision is intended for services such as those involving real estate management, construction, and other activities directly impacting physical premises.
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In the context of data hosting services, the situation is distinct. Data hosting providers utilize either owned or leased premises to house IT infrastructure essential for their operations. This includes procuring and maintaining hardware, uninterrupted power supplies, backup generators, ventilation, cooling systems, network connectivity, and security measures.
Despite these elements being vital for the operation of data centres, they do not constitute a passive service related to immovable property. Instead, data hosting involves a comprehensive range of services including server management, IT support, and security, all of which are crucial for cloud computing providers to deliver their services to end users.
The CBIC has clarified that data hosting services provided to overseas cloud computing providers cannot be classified as services directly related to immovable property. As such, Section 13(4) of the IGST Act does not apply to these services.
Given that data hosting services do not fall under the specific provisions outlined in Sections 13(3) through 13(13) of the IGST Act, the default place of supply provision under Section 13(2) comes into play. This section determines that the place of supply is the location of the recipient of the services.
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For data hosting services provided by an Indian entity to an overseas cloud computing provider, the place of supply is deemed to be outside India according to Section 13(2). As such, these services qualify as an export of services, provided all other conditions specified in Section 2(6) of the IGST Act are met.
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