“fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs;
The following three elements are critical to determine whether a place is a ‘fixed establishment’:
(a) Having a sufficient degree of permanence;
(b) Having a structure of human and technical resources; and
(c) Other than a registered place of business.
The following aspects need to be noted:
A fixed establishment refers to a place of business which is not registered;
The person should undertake supply of services or should receive and use services for own needs in such place;
Not every temporary or interim location of a project site or transit-warehouse will become a fixed establishment of the taxable person.
Temporary presence of staff in a place by way of a short visit to a place or so does not make that place a fixed establishment;
E.g.: A service provider in the business of renting of immovable property services has his registered office at Bangalore (place of business) and the property for rent along with an office is located in Chennai (place of supply). In this case, the registered office will be the principal place of business but the property in Chennai will NOT be regarded as a fixed establishment of the service provider as the degree of permanence required in representing the interests of the supplier does not exist in Chennai.
E.g.: A contract is for supply and installation of equipment where the duration of installation work at the site is (say) 15 days at Indore and the fabrication of equipment undertaken at the factory at Jaipur. After the fabrication is completed, the material is transported to the site along with installation team. For the limited duration that the installation team will be present at the site (Indore), surely the supplier will not put in place all the resources – technical and human – so as to create at the site an establishment with sufficient degree of permanence ‘to supply’ or ‘to receive’ services.
In this case also, the factory will be the principal place of business (Jaipur) but the site (Indore) will NOT be regarded as a fixed establishment of the supplier.
E.g.: A project undertaken for construction of a highway (expansion, strengthening and resurfacing of two-lane carriageway into four-lane carriageway) is expected to be undertaken over a three-year duration in Gandhidham. As such, the supplier cannot practically manage to undertake the activities that the project site (entire length of the alignment) remotely from the registered office in Delhi. Although all decisions are authorized by the central team in Delhi, these decisions are effectively delegated to be carried out by it competent team located at the site with all necessary resources – technical and human – so as to create act the site and establishment with sufficient degree of permanence ‘to supply’ or ‘to receive’ services. In this case, the site (Gandhidham) WILL BE a fixed establishment of the supplier.