The prepaid channel changes the location test
IGST Act section 12(11)(c) distinguishes prepaid mobile, internet and direct-to-home services supplied through selling agents, resellers or distributors from supplies to final subscribers. Its electronic-payment proviso requires separate attention. A subscriber’s current physical location or an employee’s internal office allocation does not replace these statutory tests. This is a prepaid-channel reconciliation, distinct from post-paid billing-address controls.
Read the applicable text: CBIC: IGST Act sections 7, 8 and 12(11).
Confirm the service and domestic scope
Section 12 applies where supplier and recipient locations are in India. Establish the actual supply, supplier, recipient and channel. A face-value voucher, dealer commission and separately supplied distribution service should not be treated as identical supplies merely because they share a recharge ID. This article determines location branches; it does not determine voucher time of supply, valuation or commission taxability.
Map physical distribution and final sales
For the specified prepaid services supplied through a selling agent, reseller or distributor of SIM cards or recharge vouchers, use that intermediary’s address in the supplier’s records at supply. For supply by a person to the final subscriber, the branch identifies where prepayment is received or vouchers are sold. Record the actual transaction level. Do not count a wholesale supply and the later retail sale as duplicate records of one supply, or merge them without analysis.
Electronic recharges require their own evidence
Where the prepaid service is availed or recharge made through internet banking or another electronic mode, the second proviso points to the recipient’s location in the supplier’s records. Preserve recharge channel, transaction ID and recipient-location record. A payment gateway’s registered office is not automatically the recipient’s location. If records are missing or inconsistent, investigate the full subsection and applicable facts rather than inventing an employee location.
Determine tax head separately
After place of supply is established, compare it with actual supplier location under sections 7 and 8 and review applicable exceptions, including SEZ facts. Rate and value are separate questions. All tax illustrations assume ordinary non-SEZ taxable services, a hypothetical aggregate 18% rate and the stated taxable bases. These are illustrative inputs; establish the actual applicable rate, valuation and taxability independently for a real transaction.
Close channel-to-invoice controls
Reconcile customer records, agent master, retail location, payment method and invoice outcome by transaction. A later master update is not proof of the original record. Preserve historical evidence and actual supplier corrections. Keep location conclusions separate from recipient input-credit entitlement and do not assume personal employee recharges become eligible company credits simply because the company reimburses them.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Recorded distributor address
Assume a Maharashtra supplier’s relevant distribution supply has a Delhi distributor address recorded at supply. Established taxable base ₹10,000 at assumed 18% gives IGST ₹1,800 and total ₹11,800. Actual subscriber travel does not alter this assumed branch.
Illustrative example 2: Final-subscriber physical sale
Assume a Gujarat supplier sells the relevant prepaid supply to a final subscriber at its Gujarat counter, where prepayment is received. On confirmed taxable base ₹5,000, assumed CGST and Gujarat GST of 9% each are ₹450 and ₹450, gross ₹5,900.
Illustrative example 3: Electronic recharge
Assume an electronic recharge by a Karnataka supplier has recipient location Tamil Nadu in its verified records. Confirmed taxable base ₹2,000 at assumed 18% gives IGST ₹360, gross ₹2,360. The bank or payment gateway location is not substituted.
Illustrative example 4: Channel populations
Verified taxable bases are ₹30,000 in the distributor branch and ₹20,000 in the electronic branch. Total is ₹50,000, with assumed aggregate tax ₹9,000. This reconciliation does not establish that both populations share one place of supply.
Illustrative example 5: Inclusive taxable charge
For a separately verified inter-State taxable recharge at an assumed 18% rate, ₹1,180 inclusive comprises ₹1,000 base and ₹180 tax. Do not use the calculation alone to establish voucher valuation or tax timing.
Illustrative example 6: Duplicates within a channel
One established taxable charge ₹4,000 plus ₹720 assumed tax appears both in a recharge feed and an invoice import. Unique gross is ₹4,720 rather than ₹9,440. A separate onward resale would require its own analysis rather than automatic deletion.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm domestic locations | Actual supplier and recipient facts. |
| 2 | Identify the prepaid service | Mobile, internet or DTH and actual contract. |
| 3 | Identify each transaction level | Wholesale, final subscriber and separate fees. |
| 4 | Classify payment channel | Physical or qualifying electronic route. |
| 5 | Retrieve historical agent address | Supplier record at supply. |
| 6 | Verify retail sale facts | Place of prepayment or voucher sale. |
| 7 | Verify electronic recipient record | Recharge and customer-location evidence. |
| 8 | Determine tax head | Supplier location, concluded place and exceptions. |
| 9 | Review valuation, timing and rate separately | Applicable transaction-specific law. |
| 10 | Reconcile invoices and corrections | Unique supply IDs and retained source history. |
Sixteen practitioner FAQs
1. Is this the post-paid billing rule?
No. It addresses the prepaid branches and electronic proviso.
2. Which services are identified in clause (c)?
Prepaid mobile, internet and DTH services through vouchers or other means.
3. What record matters in the distributor branch?
The intermediary’s address in the supplier’s records at supply.
4. What matters for final-subscriber physical sales?
Where prepayment is received or vouchers are sold under the branch.
5. What changes for electronic recharge?
The proviso points to recipient location in the supplier’s records.
6. Is the payment gateway’s office the recipient location?
Not automatically.
7. Does roaming establish place of supply?
Not by itself under these tests.
8. Can current customer masters prove historical records?
Not without effective-date and transaction evidence.
9. Are dealer commission and prepaid supply necessarily identical?
No. Identify the actual separate supplies.
10. Does face value always equal taxable value?
This article does not establish that; valuation needs separate review.
11. Does the article settle voucher time of supply?
No. That is a separate legal question.
12. Is 18% asserted for every recharge-related charge?
No. It is an express arithmetic assumption in the examples.
13. Does a corporate reimbursement establish input credit?
No. Review recipient and credit conditions independently.
14. Can wholesale and onward retail records always be deduplicated?
No. They may represent separate supplies.
15. Which provision applies if either party is outside India?
Review section 13 and other applicable provisions, rather than assuming section 12.
16. How should missing records be handled?
Investigate and document the actual facts; do not invent a location.