The Government of West Bengal on July 08, 2024, issued Clarification on the place of supply applicable for custodial services provided by banks to Foreign Portfolio Investors.
Representations have been received seeking clarification on the Place of Supply in cases of Custodial Services provided by Banks to Foreign Portfolio Investors, as a view is being taken by some field formations that the Place of Supply in case of ‘custodial service’ would be determined as per Section 13(8)(a) of the Integrated Goods and Services Tax Act, 2017.
The following has been stated-
•According to the Securities and Exchange Board of India (Custodian of Securities) Regulations 1996, ‘Custodial Services’ in relation to securities means safekeeping of securities of a client and providing services incidental thereto, and includes- maintaining accounts of securities of a client; collecting the benefits or rights accruing to the client in respect of securities; keeping the client informed of the actions taken or to be taken by the issuer of securities, having a bearing on the benefits or rights accruing to the client; and maintaining and reconciling records of the services referred above.
•The provisions of section 13(8)(a) of the IGST Act are similar to the provisions of Rule 9(a) of the Service Tax Place of Provision of Supply Rules, 2012, the clarification given in the Education Guide under Service Tax Regime is equally applicable under GST Regime.
•It is clarified that the custodial services provided by banks or financial institutions to FPIs are not to be treated as services provided to 'account holder' and therefore, the said services are not covered under Section 13(8)(a) of the IGST Act. Therefore, the place of supply of such services is not to be determined under Section 13(8)(a) of the IGST Act but has to be determined under the default provision i.e., sub-section (2) of section 13 of the IGST Act.
[Circular No. 14/2024]
