Clarification on place of supply of data hosting services provided by service providers located in India to cloud computing service providers located outside India.

Circular No.: 232/26/2024-GST
Date of Circular: 10th September 2024
Relevant Sections and Rules:

• IGST Act, 2017:
  • Section 2(13): Definition of intermediary
  • Section 13(2): Default place of supply (location of recipient)
  • Section 13(3)(a): Place of supply where goods are made available
  • Section 13(4): Services directly related to immovable property
  • Section 13(8)(b): Place of supply for intermediary services
  • Section 2(6): Definition of export of services
• CGST Act, 2017:
  • Section 168(1): Power to issue instructions

Clarification on Place of Supply of Data Hosting Services Provided by Indian Providers to Overseas Cloud Computing Companies

1. Data Hosting Service Provider Not an ‘Intermediary’ [Sec. 2(13), 13(8)(b) IGST Act]:
   Indian data hosting companies offering services to overseas cloud computing providers:

• Operate on a principal-to-principal basis,
• Handle entire infrastructure and operations independently,
• Do not interact with end-users of the cloud service,
• Are not facilitating or arranging any service between the overseas cloud provider and their users.

➤ Therefore, they do not qualify as “intermediaries”, and Section 13(8)(b) does not apply.

2. Services Not in Relation to Goods ‘Made Available’ [Sec. 13(3)(a) IGST Act]:

• Indian data hosting providers use their own or leased premises, infrastructure, and manpower.
• Even when some hardware is supplied by the overseas client, the service provider retains full operational control.
• The overseas recipient does not physically make goods available for service provision.

➤ Thus, Section 13(3)(a) does not apply either.

3. Services Not Directly Related to Immovable Property [Sec. 13(4) IGST Act]:

• The services involve active operation and management of IT infrastructure—not passive use of property.
• Data hosting includes a bundle of services like power, cooling, security, IT maintenance, etc.

➤ Hence, data hosting services are not directly related to immovable property, and Sec. 13(4) does not apply.

4. Applicable Place of Supply Rule – Default Rule [Sec. 13(2) IGST Act]:
   Since Sections 13(3)–13(13) are not applicable, the default rule in Section 13(2) applies:
   ➤ Place of supply = Location of the recipient, which in this case is outside India.
5. Treatment as Export of Service [Sec. 2(6) IGST Act]:
   Provided other conditions for export are met (supplier in India, recipient outside India, consideration in forex, etc.),
   ➤ These data hosting services qualify as export of services, and are zero-rated under GST.

Source: Circular No.: 232/26/2024-GST