PLACE OF SUPPLY - GST

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Place of Supply in GST

Place of supply is not only applicable to Services but also for the transaction of Goods. As per place of Supply the tax is to levied (IGST, CGST and SGST/UTGST) will depend on whether a particular transaction is an Inter-state supply or Intra-state supply. So, place of supply determine the tax.

It should me make clear which tax to be levied when before that an inter-state and an intra-state supply should be understand.

Section 7 of IGST Act defines what a inter-state supply is. Broadly, inter-state supply is when “location of supplier” and “place of supply” are not in the same state or same union territory.

Similarly, Section 8 of IGST Act speaks about Intra-state supply. Broadly, intra-state supply is when “location of supplier” and “place of supply” are in the same state or same union territory

There are three thing which we need to know i.e. “location of the recipient of services” and “location of the supplier of services” have been specifically defined under CGST Act (Section 2(70) and 2(71)). However, “location of the recipient of goods” and “location of the supplier of goods” has not been defined at any place.

The purpose of the place of supply provisions is two-fold

   (a.) Section 11: In case of Import or Export (Cross-border transactions)

   (b.) Section 10: In case of Domestic Transaction. (other then Import & Export)

Place of Supply for Import and Export (Section-11)

I. Import

The place of supply of goods imported into India shall be the location of the importer. 

II. Export

The place of supply of goods exported from India shall be the location outside India. 

Place of Supply for Domestic Transaction (Section-10)

Movement of Goods Section 10(1)(a)

states that "where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient" 

This section highlight that place of supplier or receiver is of no consequence to determine the place of supply when it comes to those transactions which involve the movement of goods. The place where delivery terminates i.e. where the ownership is passed on shall be critical to determine the place of supply.

This can me made more clear with an example:

Muskan Traders of Rajasthan sells 50 Laptops to Jitu Electronics in Bihar. Muskan Traders delivers the product to Jitu Electronics in its warehouse in Delhi. Place of supply, in this case, will be Delhi and IGST will be levied as it is an Inter-State transaction.

Bill to Ship to Transaction: 

As per Section 10(1)(b) of CGST Act.

"where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person" 

When goods are delivered to a party on the direction of a third person the place of supply will be the location of such third person and not where the delivery terminates.

Example I check the link               

https://www.taxclub.online/2019/02/

Example II.

Nidaan Consultant Private Limited in Delhi receives an order from Acuminous Software Private Limited in America to deliver 500 Laptops at JMS Private Limited in Delhi. On application of section 10(1)(b) place of supply will be America. The question arises will this transaction be taxed even if the place of supply is America? 

  

There will be two parts to this transaction as well- 

(a.) Between Nidaan Consultant Private Limited and Acuminous Software Private Limited:   First, we need to understand whether the transaction between Nidaan Consultant Private Limited and Acuminous Software Private Limited will be considered as Export? As per section 16, export of goods is a “Zero Rated Supply” and tax need not be levied on the same.   

As per section 2(5), “export of goods” means taking goods out of India to a place outside India. In our case, as goods are not moving out of India hence it cannot be termed as exports. 

Section 7(5)(a) states that supply of goods or services or both when the supplier is located in India and the place of supply is outside India shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce. 

Above section applies to the present case, supplier (Nidaan Consultant Private Limited) is located in India and place of supply (America) is outside India. Hence, the transaction between Nidaan Consultant Private Limited and Acuminous Software Private Limited will be considered as an inter-state supply, and IGST shall be levied on it.   

(b.) Between Acuminous Software Private Limited and JMS Private Limited:’ The transaction between Acuminous Software Private Limited and JMS private Limited cannot be considered as the import of goods as according to Section 2(11) “import of goods” means bringing goods into India from a place outside India.  

This transaction will be covered under section 7(5)(c) which states that supply of goods or services or both in the taxable territory, not being an intra-state supply and not covered elsewhere in section 7 shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce. 

In the present case, the supply of goods is in the taxable territory (Delhi), it is not an intra-state supply as a supplier (Acuminous Software Private Limited) is located outside the taxable territory and such a situation is not covered elsewhere in section 7. Hence, transaction between Acuminous Software Private Limited and JMS Private Limited is also an Inter-state transaction and IGST will have to be paid by JMS Private Limited under reverse charge mechanism (Section 5(4))

Following Topics will be Updated soon with example......

(1.) Place of supply in case of No Movement of Good
           Check the update https://www.taxclub.online/2019/03/place-of-supply-in-case-of-no-movement.html

(2.) Place of supply in case of When Goods are Installed

(3.) Place of supply in case of Goods on Board a conveyance

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