Use recorded recipient location, then test the fallback
IGST Act section 12(12) places banking and other financial services, including stock broking, at the recipient’s location on the supplier’s records. If that location is not on those records, its proviso uses supplier location. This domestic rule applies to any person; it should not be replaced automatically with a generic registered-versus-unregistered template or with the location of a payment server.
Read the applicable text: CBIC IGST Act sections 7, 8 and 12(12).
Establish scope and the actual service
Section 12 concerns supplier and recipient located in India. Identify whether the invoice is for banking, financial or broking services and establish the actual recipient. Cross-border supplies require their own applicable analysis. Neither a foreign-currency entry nor a domestic bank debit alone answers the statutory scope question.
Inspect the supplier record relevant to the supply
Match the invoice, account master, KYC/address history and any approved recipient-location update. A head office or employee address in the company’s own expense sheet is not necessarily the location on the supplier’s records. If records are contradictory or outdated, resolve the facts and applicable treatment; do not intentionally delete an available location to invoke the fallback.
Separate service value from cash movements
Loan principal, securities purchase consideration, account transfers and the service charge are different populations. A ₹10 lakh investment transaction does not, by itself, make the entire ₹10 lakh the brokerage service value. Check the actual valuation and exemption provisions separately; this article does not decide every charge’s taxability, credit eligibility or rate.
Determine the tax head after location
Compare the concluded place of supply with the legally established supplier location under sections 7 and 8, considering exceptions. The examples assume ordinary domestic non-SEZ taxable service fees at a hypothetical aggregate GST rate of 18% with no exemption, solely for arithmetic. Verify taxability, the applicable rate and exemption separately for an actual charge. They assert no universal 18% rule for all financial receipts, interest or charges.
Preserve the correction trail
If the supplier used a different recipient location, compare actual records and communicate the supported issue through the appropriate invoice/correction process. Changing an internal spreadsheet cannot amend the supplier’s invoice or tax reporting. Retain the concluded record, effective dates and resolution rather than substituting a convenient location without evidence.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Recorded Delhi recipient
A Maharashtra supplier’s records establish a Delhi recipient location. On assumed taxable service value ₹10,000 at 18%, IGST is ₹1,800 and invoice ₹11,800. The company’s payment through a Maharashtra bank account does not replace the recorded-location test.
Illustrative example 2: No recorded location
Assume the recipient location genuinely is absent from the supplier’s records, supplier location is Karnataka and the ordinary fallback applies. On ₹5,000 at assumed 18%, CGST and Karnataka GST are ₹450 each, total ₹5,900. Missing evidence in the company’s file is not the same as absence from the supplier’s records.
Illustrative example 3: Principal versus fee
A transaction includes ₹10,00,000 investment consideration and separately valued brokerage ₹2,000. On the assumed taxable brokerage and 18% rate, tax is ₹360, not ₹1,80,360 on ₹10,02,000. The example assumes the consideration is not part of brokerage’s taxable value; verify the actual valuation facts.
Illustrative example 4: Distinct recipient accounts
A Maharashtra supplier makes independently established services ₹8,000 to a recorded Delhi recipient and ₹12,000 to a recorded Karnataka recipient. Assumed IGST is ₹1,440 plus ₹2,160, total ₹3,600. Separate actual supplies support the analysis; cost-centre allocations alone do not create recipients.
Illustrative example 5: Inclusive fee
An ordinary inter-State fee of ₹23,600 includes assumed 18% GST. Base is ₹20,000 and IGST ₹3,600. This extraction does not determine the recorded location or actual rate.
Illustrative example 6: Duplicate fee record
One ₹4,000 fee and ₹720 assumed tax appear in both a statement import and the invoice ledger. Unique gross expense is ₹4,720 rather than ₹9,440. Link the two records before reviewing location and any credit claim.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm domestic scope | Supplier and recipient location evidence. |
| 2 | Classify the actual service | Financial-service or brokerage deliverables. |
| 3 | Identify recipient accounts | Contracts, invoices and account IDs. |
| 4 | Inspect recipient-location records held by the supplier | Master data and relevant history. |
| 5 | Resolve contradictory evidence | Approved updates and supplier clarification. |
| 6 | Test fallback only on its facts | Actual absence of recorded recipient location. |
| 7 | Separate service value | Fees versus principal, investments and transfers. |
| 8 | Verify rate and exemption | Actual charge-specific authority. |
| 9 | Determine tax head and credit separately | Location comparison, exceptions and credit review. |
| 10 | Reconcile invoice and corrections | Unique amounts, reporting trail and resolution. |
Sixteen practitioner FAQs
1. Is stock broking expressly included?
Yes, subsection (12) includes stock broking within its rule.
2. Does the rule apply only to registered recipients?
Its wording applies to any person within the relevant scope.
3. Which record matters?
The recipient location on the supplier’s records.
4. Does an internal cost-centre location replace that record?
No. Establish the actual statutory facts.
5. When does supplier location become place of supply?
Under the proviso where recipient location is not on the supplier’s records.
6. Does a missing company invoice file establish the fallback?
No. Investigate the supplier’s records.
7. Can a known location be ignored to use the fallback?
No. Apply the facts and the proviso correctly.
8. Do contradictory records need resolution?
Yes. Preserve the effective information and the basis of the conclusion.
9. Does a payment server determine the location?
Not merely because the payment passes through it.
10. Is the investment purchase value automatically brokerage value?
No. Establish the actual service value separately.
11. Are all financial receipts taxed at 18%?
No. The illustrations expressly assume taxability and rate for their service fees.
12. Does this article determine interest exemption?
No. Examine the actual applicable provisions separately.
13. Does correct place of supply establish input credit?
No. Credit entitlement is an independent question.
14. Can a company edit amend a supplier invoice?
No. Follow the applicable supplier correction and reporting process.
15. Are cross-border supplies governed by these examples?
No. Establish the applicable cross-border rule separately.
16. What prevents duplicate expense and credit working?
Link statement and invoice records to a unique service-charge obligation.