GST Circular No 220/2024
The GST circular addresses the place of supply for custodial services provided by banks to Foreign Portfolio Investors (FPIs). Some field formations previously considered that the place of supply for these services should be determined by the location of the service provider, following Section 13(8)(a) of the IGST Act. However, this interpretation is not accurate for custodial services.
Custodial services involve maintaining and managing securities on behalf of clients, such as FPIs. These services include safekeeping of securities, account maintenance, and collection of benefits related to securities. Unlike traditional banking services that cater to account holders, custodial services are more specialized and do not fall under the usual definition of services provided to account holders.
The circular clarifies that custodial
services provided to FPIs should not be classified under Section 13(8)(a) of the IGST Act, which applies to services provided to account holders. Instead, the place of supply for these services should be determined based on the default rule outlined in Section 13(2) of the IGST Act.
According to the default rule, the place of supply for such services is where the service receiver is located. This clarification ensures uniformity in the implementation of GST provisions and corrects any misinterpretations regarding the place of supply for custodial services.
