Location of Supply in the GST Framework

In Goods and Services Tax (GST) system, the "Place of Supply" is a fundamental concept that identifies whether a transaction is intra-state or inter-state. This helps to know whether the taxes to be levied as CGST (Central Goods & Services Tax), SGST (State Goods & Services Tax), or IGST (Integrated Goods & Services Tax). Understanding of Place of Supply rules is essential for companies to maintain legal and tax compliance.

This blog talks about in detail regarding the Place of Supply of goods under GST, such as the place of delivery, movement of goods, transactions with third parties, e-commerce sales, etc.

What is the Place of Supply under GST?

"Place of Supply" is the place where goods are supplied or made available under the GST system. This helps in determining the nature of the supply whether intra-state or inter-state and further calculations of the tax implications. Section 10 of the IGST Act, 2017 talks about the provisions on the Place of Supply.

The location of supply may differ depending on the delivery method. For example, if products are delivered to a third party or sold over the internet, the location of supply may differ accordingly, which affects the tax rates and compliance obligations.

Place of Supply Involving Movement of Goods

1. Intra-State Supply (Same State)

For intra-state supply, both the recipient and the supplier are within the same state. The CGST and SGST taxes are applicable when the items are transported within the state. In this instance, the location where the items are delivered to the recipient is the point of supply.

Example:

Vinod, who is from Mumbai (Maharashtra), sells products to a person or company in Pune (Maharashtra).
Place of Supply: Maharashtra
Taxes: CGST & SGST

2. Inter-State Supply (Other State)

Inter-state supply takes place when goods are transported from one state to another. In this instance, IGST is the tax that must be applied, and the recipient's location determines where the supply must be made.

Example:

Vinod, who is from Bengaluru (Karnataka), sells something to a person or company in Chennai (Tamil Nadu).
Place of Supply: Tamil Nadu
Taxes: IGST

3. Third-Party Delivery

When goods are delivered to a third party, the place of supply is determined by where the third party's instructions are carried out. This is covered by Section 10(1)(b) of the IGST Act.

Example 1:

Vinod, who is located in Hyderabad (Telangana), supplies goods to Akash in Delhi, but Akash wants the goods to be supplied to Kolkata (West Bengal).
Place of Supply: Delhi
Taxes: IGST

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Example 2:

Vinod, a resident of Hyderabad (Telangana), makes a sale of goods to Akash, another resident of Hyderabad (Telangana), but Akash would like the goods to be dispatched to Bengaluru (Karnataka).
Place of Supply: Telangana
Taxes: CGST & SGST (as both business and customer are within the same state)

4. E-Commerce Sale

For e-commerce transactions, the place of supply is where the goods are actually delivered. The tax effect will be intra-state or inter-state depending on the supply.

Example:

Mr. Raj, who is in Mumbai (Maharashtra), purchases a mobile from Amazon to be delivered to his mother in Lucknow (UP). The mobile is processed and dispatched by M/s ABC (an online retailer from Gujarat).
Place of Supply: Mumbai, Maharashtra
Taxes: IGST

Place of Supply Not Involving Movement of Goods

Where goods are not being moved (say, goods are handed over at the supplier's or recipient's premises), the place of supply is established under Section 10(1)(d) of the IGST Act.

1. Goods Supplied at the Supplier's Location

Where goods are handed over directly at the supplier's location, the place of supply is where the goods are located when delivery is received.

Example:

A customer collects goods from the warehouse of the Tamil Nadu supplier.
Place of Supply: Tamil Nadu

2. Goods Supplied at the Recipient's Premises

Where the recipient takes delivery of goods without them being transported, the place of supply is the recipient's premises where the goods are taken.

Example:

An industrial machine is installed and commissioned at a factory without being shifted.
Place of Supply: The location of the factory (recipient's premises).

Effect of GSTIN on Place of Supply

Aside from the rules provided in the IGST Act, the business's GSTIN (Goods and Services Tax Identification Number) is also responsible for determining the place of supply. The state in which the firm is registered (i.e., where the GSTIN is issued) is critical in deciding whether a transaction is intrastate or interstate.

If the business's GSTIN is registered in multiple states (for example, the provider in Maharashtra and the recipient in Gujarat), the supply is interstate, and IGST will apply.

If the business's GSTIN is registered in the same state (for example, if both the supplier and the recipient are from Maharashtra), the supply is intra-state, and CGST and SGST will apply.

Conclusion

Understanding Place of Supply under GST is critical for businesses to comply with tax rules and precisely calculate the tax liability for each transaction. Whether it's intra-state, inter-state, or e-commerce transactions, determining the right place of supply allows businesses to calculate the applicable taxes—CGST, SGST, or IGST.

Furthermore, organizations must consider the supplier and recipient's state-specific GSTINs, which determine whether the transaction is intrastate or interstate. Companies should always follow the rules of Section 10 of the IGST Act and seek expert assistance if necessary to ensure effective compliance with GST legislation.

FAQs

1. What is the Place of Supply of Goods under GST?

Place of Supply helps decide whether the transaction is intrastate or interstate, as well as the applicable tax.

2. What are GST Place of Supply Rules?

Place of Supply regulations determine the location where products or services are supplied, whether the supply is intra-state or inter-state, and the applicable taxes. These provisions are largely governed by Section 10 of the IGST Act.

3. How is the Place of Supply Determined When There is Import and Export?

Imports are levied IGST at the place of supply, which is the importer's location. Exports have a place of supply outside of India and are treated as zero-rated supplies under GST.