How to Determine Place of Supply under GST?

Last Update Date : August 13, 2018

place of supply under GST

When a batsman hits a boundary, the fielders around can do nothing but watch the ball sliding into the fence. This is the effect of a perfect placement of the delivery by the batsman. Similarly, if the Government of India has introduced Place of Supply guidelines under GST to determine the taxes that are to be levied on the delivery of a particular good or a service.

Under GST regime, the tax is determined on the basis of place, time and supply of goods and services. This guide by earlyGST will help you in determining the place of supply of services. GST Act lays down provisions for deducing the place of supply of services.

Understanding Place of Supply in GST

The concept of GST eliminates all the indirect taxes. There are different tax sections under GST which are Central GST (CGST), State GST (SGST), Inter-state GST (IGST) and Union Territory GST (UTGST). To determine the section that is applied to the transaction of goods or services, the Place of Supply of the same is very important. The stature of the transaction is defined by the place of supply and location of the supplier. The place from which the supplier provides the goods or services is called the location of the supplier. The place at which the recipient procures those goods or services is called the place of supply.

[ Read: Types of GST ]

Who Needs Establishing Place of Supply?

There are several reasons for determining place of supply:

  • It is important for persons dealing in cross-border services
  • It is also important for persons who deal in interstate transactions
  • The suppliers who operate within India from multiple locations and supply goods or services from different locations also need to determine it
  • Special transaction zones like SEZ, exempted zones etc. also need it

Why is it Necessary to Determine Place of Supply?

The following reasons make the determination of place of supply of services important:

  • It is required for the determination of place of levy and jurisdiction.
  • To avoid double taxation of a transaction by different states.
  • To enable proper tax collection and distribution by different states.
  • To ensure proper Rules for Goods and Services separate.
  • To ensure seamless credit.

Time of Supply

The time of supply can be determined the one which is earlier of the following:

  • The date of issuance of invoice
  • Date of receipt of payment

In case of the later, the one which is earlier of the following is selected:

  • The date of credit in the bank account
  • Date at which the receiver enters in the transaction in his books of accounts.

In case there is a reverse charge, the earlier of the following will be considered as the time of supply:

  • Date of Payment
  • Date of receipt of goods
  • Date immediately 30 days from the date of issue of invoice for goods and 60 days from the date of issue of invoice for services.

Value of Supply

The value of supply determines the amount of GST that is to be levied on the transaction. The value of supply has following attributes:

  • Type of goods and services
  • Amount of goods and services including discounts offered, interest on late payments, packaging charges and commission
  • Any cess or duty applicable
  • Subsidies applied, if any

Determining the Place of Supply of Services

GST is levied at the place where goods and services are actually consumed. The revenue from GST collection goes to the state where this consumption occurs. Based on the place of supply and nature of transaction, three different sub-types of GST are levied. IGST is applicable where there is inter-state transaction. SGST and CGST become applicable where there is intra-state transaction.

So, before determining place of supply, we need to first determine two things:

  • Location of the recipient of service
  • Location of the supplier of service

Location of the Recipient of Service

Based on the following four different situations, the place of the recipient of service is determined:

  • If the supply is received at a registered place of business then such place is considered as the location of recipient.
  • If the supply is received at a place other than the registered place of business (a fixed establishment elsewhere) then such establishment is considered the location of recipient.
  • If a supply is received at more than one establishment, whether the place of business or fixed establishment then the location of the establishment most directly concerned with the receipt of the supply is considered the location of recipient.
  • If the supply is received at a place other than those mentioned above then the location of the usual place of residence of the recipient.

Location of the Provider/Supplier of Services

The location of supplier of service is determined on the basis of the following situations:

  • If a supply is made from the registered place of business then such place is considered the location of supplier.
  • If a supply is made from a place other than the registered place of business but a fixed establishment elsewhere then the location of such establishment is considered the location of supplier.
  • If a supply is made from more than one establishment, whether the registered place of business or fixed establishment then the location of the establishment most directly concerned with the provision of the supply is considered the location of supplier.
  • If a supply is made from places other than those mentioned above then the location of the usual place of residence of the supplier is considered the location of supplier.

Determining the Type of Transaction

Once we have determined the location of recipient and supplier of service, it becomes important to understand the transaction occurring between them. It helps in determining the sub-type of GST applicable in each case.

The transactions in terms of supply of services can be broadly categorized as below:

Domestic Transactions

If both the parties involved in the transaction (supplier and recipient) are located in India then the transaction is considered as a domestic transaction. They are further categorised into two different types:

  • Inter-state transaction – It occurs when the supplier and recipient are located in two different states
  • Intra-state transaction – It occurs when the supplier and the recipient are located within the same state

Note: In general, the place of supply for services will be the location of the service recipient if the recipient is a registered person. If the service is provided to an unregistered person, the place of supply will either be location of the service recipient (if the address is available on record) or it will be location of service provider.

International Transactions

If any of the parties involved in the transaction (supplier and recipient) are located outside India then the transaction is considered as an international transaction.

Note: The place of supply for services in terms of international transactions will be the location of service recipient or the location of the supplier (if the location of service recipient is not available).

Examples:

Type of Service Place of Supply
Health, Beauty, Restaurant services Location where the service is being performed
Training Services: Registered recipient Location of the recipient
Training Services: Un-registered recipient Location where the service is being performed
Amusement Parks, cultural events, sporting events Location where the activity takes place
Goods transportation services: A Registered person Location of the recipient
Goods transportation services: An Un-registered person
Passenger transportation services: A Registered person Location of the recipient
Passenger transportation services: An Un-registered person Place where the passenger embarks on the conveyance for a continuous journey
BFSI Services: A Registered person
BFSI Services: An Un-registered person
Immovable property services Location of the service

Determining Place of Supply of Goods

The place of supply of goods gets determined with the transaction taking place either inter-state, intra-state, is imported or exported.

Note: The supplier and the recipient should be registered at both the location of supplier and location of the recipient.

Following points further classify the place of supply:

Movement of Goods

Whenever there is any movement of goods by the supplier or the receiver or any other person involved in the transaction, the final destination of the delivery of goods will be the place of supply for this transaction.

Example: Consider the transaction of movement of 500 automobiles. The following table gives you a brief idea of the place of supply and tax that will be levied:

Sr. No Location of Supplier Location of Recipient Transport of goods done by Goods delivered at Tax to be levied Place of Supply
1. Pune, Maharashtra Nagpur, Maharashtra Supplier Nagpur CGST, SGST Nagpur
2. Pune, Maharashtra Kolkata,  West Bengal Supplier Kolkata IGST Kolkata
3. Pune, Maharashtra Pondicherry Supplier Pondicherry CGST, UTGST Pondicherry
4. Pune, Maharashtra Ahmedabad, Gujrat Supplier Aurangabad, Maharashtra IGST Ahmedabad
5. Pune, Maharashtra Bangalore, Karnataka Recipient Pune, Maharashtra CGST, SGST Pune
6. Online seller (Registered in Chennai, Tamil Nadu) Pune, Maharashtra Supplier (e-Commerce giant) Chennai, Tamil Nadu IGST Pune
7. Online seller (Registered in Pune, Maharashtra) Pune, Maharashtra Supplier (e-Commerce giant) Chennai, Tamil Nadu CGST, SGST Pune

No Movement of Goods

Whenever there is no movement of goods by the supplier or the recipient or any other third person involved in the transaction or if the goods are to be installed at any location, the location of the goods at the time of delivery or the place of installation of the goods will be the place of supply.

Consider XYZ Company has an order of supplying 100 lathe machines, the following table describes the place of supply and tax to be levied on such goods.

Sr. No Location of Supplier Location of Recipient Location of goods at Installation of goods at Tax to be levied Place of Supply
1. Pune, Maharashtra Nagpur, Maharashtra Pune, Maharashtra CGST, SGST Pune
2. Indore,      Madhya Pradesh Indore,      Madhya Pradesh Indore,      Madhya Pradesh CGST, SGST Indore
3. Indore,      Madhya Pradesh Indore,      Madhya Pradesh Pune, Maharashtra IGST Pune
4. Indore,      Madhya Pradesh Pune, Maharashtra Indore,      Madhya Pradesh CGST, SGST Indore
5. Indore,      Madhya Pradesh Pune, Maharashtra Pune, Maharashtra IGST Pune
6. Indore,      Madhya Pradesh Pune, Maharashtra Jaipur,    Rajasthan IGST Jaipur

Goods Supplied on Board

Whenever the goods are supplied on a vessel, aircraft, train or motor vehicle location of the goods at the time of boarding of the goods will be the place of supply.

Consider a company provides fruit juice cans to aircraft, trains etc. for the customers who are travelling. The following table describes the place of supply and tax to be levied on such goods:

Sr. No Departure Arrival Location of goods  boarded at Tax to be levied Place of Supply
1. Pune, Maharashtra Nagpur, Maharashtra Pune, Maharashtra CGST, SGST Pune
2. Indore,      Madhya Pradesh Delhi Jaipur, Rajasthan IGST Jaipur

The place of supply is not dependent upon the location where the buyer buys the products. It depends upon the location where the goods are boarded in the conveyance.

Goods Imported or Exported

Whenever the goods are imported from one country, the place of supply is the location of the buyer and the tax to be levied on those goods is IGST.

Example: If Shweta imports L’Oreal Lipsticks from New York to Pune. The Place of supply will be Pune and the tax to be levied is IGST.

The goods which are exported will have the place of supply as the place where the goods are exported, and they are exempted under GST.

Example: If Shraddha exports Lakme lipsticks from Pune to London, the Place of Supply will be London, and they are exempted under GST.

The place of supply is the most important concept in the operations of GST as the place of supply determines the tax to be levied on the goods or the service. The place of supply, time of supply and value of supply together form the functioning of the GST System. earlyGST by H&R Block will provide effective assistance in filing your GST returns.

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