The Central Board of Indirect Taxes and Customs ( CBIC ) has provided clarity on whether data hosting services provided by Indian service providers to overseas cloud computing service providers are in relation to goods “made available” by the recipient.
It is clarified that the Indian hosting services provided to outside cloud service providers does not made physically goods āmade availableā and the supply cannot be determined under Section 13(3)(a) of IGST Act.
Section 13(3)(a) of the IGST Act states that if services are provided in relation to goods physically made available by the recipient to the service provider, the place of supply is the location of the service provider. However, in the context of data hosting services, CBIC has clarified that this provision does not apply.
In the case of data hosting, the service provider operates independently, utilising their own infrastructure, which includes premises, hardware, and personnel required for hosting. These infrastructures, essential for data hosting, such as cooling systems, power supply, software, network connectivity, and security, are owned and managed by the data hosting provider.
The overseas cloud computing providers do not own or physically provide this infrastructure, making it clear that the infrastructure is not “made available” by the recipient to the data hosting provider. Therefore, Section 13(3)(a) is not applicable to determine the place of supply.
The CBIC further addressed the situation where a cloud computing service provider may supply some hardware necessary for data hosting. Even in these cases, the data hosting provider manages the entire operation, including premises, software, power, connectivity, security, and human resources, which are critical to providing the service.
Hence, even though some hardware may be provided by the cloud computing service provider, it cannot be said that the data hosting services are directly provided “in relation to” the goods made available by the recipient. Consequently, the place of supply cannot be determined under Section 13(3)(a).
The CBIC clarified that data hosting services provided by Indian service providers to overseas cloud providers do not involve goods physically “made available” by the recipient. Therefore, the place of supply for such services cannot be determined under Section 13(3)(a) of the IGST Act, and it is based on other provisions of the Act applicable to the supply of services.
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