The concept of place of supply in GST is of paramount importance to determine the taxable jurisdiction considering whether the transaction is intra state or inter state on the basis of which tax (IGST or CGST and SGST/UTGST) is to be levied. GST is a destination based i.e. the supply of goods or services will be taxed at the place where they are consumed and the consumption state will have the right to collect.
Significance of correct determination of place of supply in GST
If an inter state transaction is wrongly treated as an intra state transaction, then the taxpayer will have to pay the tax correctly again and claim the refund of the wrongly deposited tax. Therefore, to avoid any such confusion, it is crucial that there is correct determination of place of supply in GST.
Separate Rules for B2B and B2C transactions
Before we analyze the relevant sections of place of supply in GST, we must understand that there are separate rules for place of supply for B2B and B2C transactions.
In B2B transactions, the recipient being a registered person avails ITC for paying his taxes and no real revenue accrues to the Government. Therefore, in B2B transactions, the place of supply in GST is usually the location of the recipient.
However, in B2C transactions, the supply is made to an unregistered person who consumes the same and cannot avail ITC, therefore, the taxes paid actually reach the government.
Separate Rules for Place of Supply in GST for – Goods and Services
Goods are usually tangible and thus there is no difficulty in ascertaining the place of supply in GST, on the other hand, services are intangibles and the place of supply of services under GST depends on the manner of delivery, billing address, etc. Thus, the place of supply of goods in GST is governed by Section 10 and 11 and the place of supply of services under GST are governed separately by Section 12 and 13.
Place of Supply in GST – Goods u/s 10 related to domestic transactions
As per Section 10 of the IGST Act, 2017 governs the place of supply of goods other than supply of goods imported into or exported outside India i.e. domestic transactions. The detailed analysis of the section with examples is as under:-
Transaction I – Where the supply involves movement of goods either by the supplier or the recipient or the transporter.
Place of Supply in GST – The location of the goods at which the movement of goods terminates for delivery to the recipient.
Example – M/s Ajay Plywood from Kota sells 10 chairs to M/s Mahesh Traders which has to be delivered at their shop at Jaipur. Thus, the Place of Supply is Jaipur.
Transaction II – 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, commonly known as ‘bill to ship to’ transactions.
Place of Supply in GST – The important point to note here is that this section captures only the first supply between supplier and third person. Therefore, the place of supply is the principal place of business of the third person and not the actual recipient or the original buyer.
Example – Mr. Kailash of Maharashtra purchased goods from Mr. Suresh of Haryana which on the instruction of Mr. Kailash has to be delivered by Mr. Suresh to Mr. Rajendra of Chennai. Thus, there are 3 parties here:-
Mr. Suresh – Supplier
Mr. Rajendra – Recipient
Mr. Kailash – Third party on whose instructions goods are being delivered.
Therefore, the place of supply will be Maharashtra i.e. the principal place of business of the third person.
Transaction III – Where the supply involves no movement of goods either by the supplier or the recipient
Place of Supply in GST – The location of such goods at the time of delivery to the recipient.
Example – This is usually in the case of sale and lease back transactions. ABC from Mumbai had leased out its plant for production of bottles to XYZ from Noida. Later, XYZ purchased the same plant from ABC and continued the production as it is. Thus, there was no actual movement of the plant on account of the sale transaction and the place of supply will be Noida i.e. the location of the plant at the time of sale.
Transaction IV – Where the supply involves installation or assembly of goods
Place of Supply in GST – The assembly or installation site.
Example – Tanya from New Delhi purchased chimneys from M/s Deluxe Equipments for installation at her restaurants in Chandigarh. Here, the place of supply of the chimneys will be the installation site i.e. Chandigarh.
Transaction V – Where the supply of goods is on board for conveyance
Place of Supply in GST – The location where the goods are taken on board.
Example – Mr. Patel boarded the New Delhi-Bangalore superfast express from New Delhi. He was carrying some goods for sale during the journey when he boarded the train at New Delhi, however, since the train had maximum passengers boarding from Bhopal, he started selling his goods only when the train had reached Bhopal. However, irrespective of where the goods on board are sold, the place of supply will be the location where the goods are taken on board i.e. New Delhi.
Place of Supply in GST – Goods u/s 11 related to import and export of goods
As per Section 11 of the IGST Act, 2017 governs the place of supply of goods imported into or exported outside India. The detailed analysis of the section with examples is as under:-
Transaction I – Where the goods are imported into India
Place of Supply in GST – The location of the importer
Example – Mr. Vikas is a manufacturer of heavy machinery in Chennai. For his production activities, he required some accessory parts from Japan. He imported the goods from Japan to his factory in Chennai. Thus, the place of supply will be Chennai.
Transaction II – Where the goods are exported from India
Place of Supply in GST – Location outside India
Example – Mr. Shekhar is a manufacturer of machines in Haryana. He has sold his machines to buyers in Singapore. The place of supply will be outside India.
Circular No. – 33/2017-Cus dated 01.01.2018 – Regarding taxation of high seas sales of imported goods
High Seas Sale is a transaction whereby the original importer sells the goods to a third person before the goods are entered for custom clearance. Doubts arise whether original importer as well as the buyer purchasing on high seas both liable to pay IGST. In this regard, circular no.33/2017-Cus dated 01.01.2018 issued to clarify that IGST on High Sea Sale transactions of imported goods shall be levied and collected only at the time of importation i.e. the buyer of high seas sale shall only be liable to pay IGST at the time of clearance of imported gods.
High seas seller (original importer) won’t be liable to pay IGST. Buyer shall pay IGST on the final purchase value as per last High Sea Transaction envisaging all margins earned by all persons who made High Sea Sales of such goods.
FAQs related to place of supply in GST
Q1. What is the jurisdiction of the National (& Regional Benches) & the State (& area benches) of the Tribunal?
A1. The National Bench or Regional Benches of the Appellate Tribunal shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in the cases where one of the issues involved relates to the place of supply. The State Bench or Area Benches shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in the cases involving matters other than those cases where the issues involved relates to the place of supply.
Q2. Whether questions relating to place of supply can be asked under Advance Ruling Mechanism?
A2. No, the questions relating to place of supply cannot be asked under Advance Ruling Mechanism.