CBIC clarifies Data Hosting Services for Overseas Cloud Providers Not Intermediary Services Under IGST Act [Read Circular]

The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification regarding whether data hosting services provided by data centers to overseas cloud computing service providers qualify as "intermediary services" under Section 2(13) of the Integrated Goods and Services Tax (IGST) Act.

As per Section 2(13) of the IGST Act, an intermediary is defined as a broker, agent, or any other person who arranges or facilitates the supply of goods or services on behalf of another party but does not provide the main supply themselves. In this context, intermediaries do not provide services on their own account but act as facilitators between the supplier and the recipient. On the other hand, individuals or entities that supply goods or services on their own account are not classified as intermediaries.

In practice, cloud computing service providers enter into contracts with data hosting service providers to use their data centers for hosting cloud services. These data hosting providers either own or lease data centers, manage infrastructure, and provide necessary services such as infrastructure monitoring, IT management, and equipment maintenance. Importantly, data hosting service providers typically do not interact with the end customers of the cloud service providers and may not have any knowledge of who the end users are.

The key clarification provided by the CBIC is that data hosting service providers supply their services directly to the cloud computing service providers on a principal-to-principal basis. They do not act as brokers or agents and are not facilitating the supply of cloud services between cloud providers and their end users.

Therefore, the relationship between the data hosting service provider and the cloud computing service provider does not fall under the definition of an "intermediary" under Section 2(13) of the IGST Act.

As a result, the place of supply for data hosting services provided to overseas cloud computing service providers cannot be determined under Section 13(8)(b) of the IGST Act, which governs the place of supply for intermediary services. Instead, the place of supply is determined based on general provisions applicable to the supply of services, reinforcing that these data hosting services are not intermediary services.

To Read the full text of the Order CLICK HERE

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