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Circular No. 232/26/2024-GST
F. No. CBIC-20001/6/2024-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
***
New Delhi, dated the 10
th
September, 2024
To,
The Principal Chief Commissioners/ Chief Commissioners/
Principal Commissioners/ Commissioners of Central Tax (All),
The Principal Directors General/ Directors General (All).
Madam/Sir,
Subject: Clarification on place of supply of data hosting services provided by service
providers located in India to cloud computing service providers located outside India-reg.
Representations have been received from the trade and industry seeking clarification on
the place of supply in case of data hosting services provided by service providers located in India
to cloud computing service providers located outside India.
2. Issue
2.1 It has been represented that some field formations are of the view that the place of supply
of data hosting services provided by the service providers located in India to cloud computing
service providers located outside India is the location of data hosting service provider in India
and therefore, the benefit of export of services is not available on such supply of data hosting
services.
2.2 Thus, clarification has been sought in respect of the following issues-
(i) Whether data hosting service provider qualifies as ‘Intermediary’ between the cloud
computing service provider and their end customers/users/subscribers as per Section 2(13) of the
Integrated Goods and Services Tax Act, 2017 (herein after referred to as the “IGST Act”) and
whether the services provided by data hosting service provider to cloud computing service
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providers are covered as intermediary services and whether the place of supply of the same is to
be determined as per section 13(8)(b) of IGST Act.
(ii) Whether the data hosting services are provided in relation to goods “made available” by
recipient of services to service provider for supply of such services and whether the place of
supply of the same is to be determined as per section 13(3)(a) of the IGST Act.
(iii) Whether the data hosting services are provided directly in relation to “immovable property”
and whether the place of supply of the same is to be determined as per section 13(4) of the IGST
Act.
3. Clarification
3.1 Whether data hosting service provider qualifies as ‘Intermediary’ between the cloud
computing service provider and their end customers/users/subscribers as per Section 2(13)
of the IGST Act and whether the services provided by data hosting service provider to
cloud computing service providers are covered as intermediary services and whether the
place of supply of the same is to be determined as per section 13(8)(b) of IGST Act.
3.1.1 As per section 2(13) of the IGST Act, read with Circular no. 159/15/2021-GST dated
20.09.2021, a broker, agent or any other person who arranges or facilitates the main supply of
goods or services or both or securities and has not involved himself in the main supply on his
own account is considered as ‘intermediary’. Persons who supply goods or services, or both on
their own account are not covered in the definition of “intermediary”.
3.1.2 The cloud computing service providers generally enter into contract with data hosting
service providers to use their data centres for hosting cloud computing services. Data hosting
service provider either owns premises for data centre or operates data centre on leased premises,
procures infrastructure and human resource, handles operations like infrastructure monitoring, IT
management and equipment maintenance, etc. to provide the said supply of data hosting services
to the cloud computing service providers. The data hosting service provider generally handles
all aspects of data centre like rent, software and hardware infrastructure, power, net connectivity,
security, human resource, etc. Importantly, the data hosting service providers do not deal with
end users/consumers of cloud computing services and may not even know about the end users.
3.1.3 It is observed that data hosting service provider provides data hosting services to the
cloud computing service provider on a web platform through computing and networking
equipment for the purpose of collecting, storing, processing, distributing, or allowing access to
large amounts of data. The cloud computing service provider provides cloud-based applications
and software services to various end users/customers/subscribers for data storage, analytics,
artificial intelligence, machine learning, processing, database analysis and deployment services,
etc.. The end users/customers/subscribers access cloud computing services seamlessly over the
internet through technology hosted on data centers. There appears to be no contact between data
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hosting service provider and the end users/ consumers/ subscribers of the overseas cloud computing
service provider. Thus, it is observed that the data hosting service provider provides data hosting
services to the cloud computing service provider on principal-to-principal basis on his own
account and is not acting as a broker or agent for facilitating supply of service between cloud
computing service providers and their end users/consumers.
3.1.4 Accordingly, it is clarified that in such a scenario, the services provided by data hosting
service provider to its overseas cloud computing service providers cannot be considered as
intermediary services and hence, the place of supply of the same cannot be determined as per
section 13(8)(b) of IGST Act.
3.2 Whether the data hosting services are provided in relation to goods “made
available” by recipient of services to service provider for supply of such services and
whether the place of supply of the same is to be determined as per section 13(3)(a) of the
IGST Act, 2017.
3.2.1 Section 13(3)(a) of the IGST Act provides that in cases where the services are supplied in
respect of goods which are made physically available by the recipient of services to service
provider, the place of supply will be location of service provider.
3.2.2 In the instant scenario, it is observed that the data hosting service provider, as an
independent entity, is providing seamless data hosting services to the overseas cloud computing
service providers, through the premises, hardware and personnel at the data centre which not
only comprises of hardware but also other essential infrastructure (without which the hardware
infrastructure cannot be utilized) like ventilation and cooling system, uninterrupted power
supply, software, network connectivity, security protocols, etc. which are owned by the data
hosting service providers and are independently handled, operated, monitored and maintained by
them. These data hosting service providers are charging their clients (cloud computing service
providers), the charges for the services being provided by them to these clients as consideration
depending on the specific terms and conditions as per agreements between them. From the
above, it is observed that throughout the provision of the said services, the data hosting service
provider owns premises for data center or operates data center on leased premises, independently
handles, monitors and maintains the premises, hardware and software infrastructure, personnel
and in such scenario, the overseas cloud computing service providers cannot be considered to
own the said infrastructure and make the same physically available to the data hosting service
provider for supply of the said services
3.2.3 In view of above, it is clarified that data hosting services provided by data hosting service
provider to the saidcloud computing service providers cannot be considered in relation to the
goods “made available” by the said cloud computing service providers to the data hosting service
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provider in India and hence, the place of supply of the same cannot be determined under section
13(3)(a) of the IGST Act.
3.2.4 There may be some cases where some of the hardware required for data hosting service is
provided by the recipient of the service, i.e., the cloud computing service provider to the data
hosting service provider. Even in these cases, data hosting service provider handles all aspects of
data centre, like arranging for the premises, making available software and other hardware
infrastructure, power, net connectivity, security, human resource, maintenance etc., for providing
data hosting services to the cloud computing service provider. Accordingly, in such cases,
though the data hosting services is being provided by the data hosting service provider inter-alia
using the hardware made available by the cloud computing service provider, it cannot be said
that data hosting service are being provided in relation to the said goods made available by the
cloud computing service provider to them. Accordingly, even in these cases, place of supply
cannot be determined under section 13(3)(a) of the IGST Act..
3.3 Whether the data hosting services are provided directly in relation to “immovable
property” and whether the place of supply of the same is to be determined as per section
13(4) of the IGST Act.
3.3.1 Section 13(4) of the IGST Act provides for the place of supply where services supplied
are directly in relation to immovable property.
3.3.2 In the present scenario, it is observed that the data hosting service providers either use
owned or leased premises for keeping IT infrastructure and other hardware required for
providing data hosting services. They also procure hardware, uninterrupted power supplies,
backup generators, ventilation and cooling equipment, network connectivity, fire suppression
systems, security, human resource, etc.; handle operations like server monitoring, IT
management and equipment maintenance, including repairs and replacements of the same, for
providing data hosting services to their clients.
3.3.3 Thus, it is observed that data hosting services are not passive supply of a service directly
in respect of immovable property but are regarding supply of a comprehensive service related to
data hosting which involves the supply of various services by the data hosting service
provider like operating data centre, ensuring uninterrupted power supplies, backup generators,
network connectivity, backup facility, firewall services, and monitoring and surveillance
service for ensuring continuous operations of the servers and related hardware, etc. which
are essential for cloud computing service provider to provide cloud computing services to the
end users/customer/subscribers.
3.3.4 Accordingly, it is clarified that in such a scenario, the data hosting services cannot be
considered as the services provided directly in relation to immovable property or physical
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premises and hence, the place of supply of such services cannot be determined under section
13(4) of IGST Act.
4. Further, the place of supply for the data hosting services provided by data hosting service
provider located in India to overseas cloud computing service providers does not appear to fit
into any of the specific provisions outlined in sections 13(3) to 13(13) of the IGST Act.
Therefore, the place of supply in such cases needs to be determined according to the default
provision under section 13(2) of the IGST Act, i.e. the location of the recipient of the services.
Where the cloud computing service provider receiving the data hosting services are located
outside India, the place of supply will be considered to be outside India according to section
13(2) of the IGST Act.
5. Accordingly, supply of data hosting services being provided by a data hosting service
provider located in India to an overseas cloud computing entity can be considered as export of
services, subject to the fulfilment of the other conditions mentioned in section 2(6) of IGST Act.
6. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.
7. Difficulty, if any, in the implementation of this Circular may be brought to the notice of
the Board. Hindi version will follow.
(Sanjay Mangal)
Principal Commissioner (GST)
