The Goods and Services Tax (GST) regime was introduced in India on 1st July 2017, and since then, businesses have been grappling with a host of challenges related to its implementation. One of the most critical issues that businesses face is the determination of the place of supply of goods and services. In this article, we will discuss the implications of the GST on the supply of goods, specifically whether it is inter-state or not.
Before we dive into the specifics of inter-state supplies, let's first understand what is meant by the term 'supply of goods'. Section 7 of the CGST Act, 2017 defines supply as:
"...the transfer of goods or services or both, whether or not for consideration, in the course of furtherance of business."
The meaning of supply is not limited to the sale of goods or services but also includes the transfer of goods by way of lease, hire, barter, exchange, or any other form of transfer. The term 'supply' also covers the import of services, irrespective of whether it is for a consideration or otherwise.
Section 7 of the Integrated Goods and Services Tax (IGST) Act, 2017, defines inter-state supply as:
"...any supply of goods or services or both, where the location of the supplier and the place of supply are in different states, two different union territories or in a state and a union territory."
In simpler terms, if the supplier and the place of supply are in different states, then it is considered an inter-state supply.
Under the GST regime, IGST is applicable on inter-state supplies. The tax collected under IGST is shared between the Centre and the States. The IGST rate is equal to the sum of the CGST and the SGST/UTGST rates. For example, if the CGST rate is 9% and the SGST rate is 9%, then the IGST rate will be 18%.
A supply is considered as inter-state supply if the supplier and the place of supply are in different states. The place of supply is determined based on the type of goods and the type of transaction. The following table summarizes the place of supply for different goods and transactions:
Type of goods/transactionsPlace of supplyGoods are transported by the supplier to the recipientThe place of supply will be the location where the goods are delivered to the recipient.Goods are delivered by the supplier to a person on behalf of the recipientThe place of supply will be the location where the goods are delivered to the person on behalf of the recipient.Goods are supplied by way of transfer of titleThe place of supply will be the location where the goods are located at the time of transfer of title.Goods are supplied by way of transfer of possession or controlThe place of supply will be the location where the goods are located at the time of transfer of possession or control.Goods are supplied on board a conveyanceThe place of supply will be the location where the goods are taken on board.
The GST regime has brought significant changes in the way in which businesses operate in India. The determination of the place of supply of goods and services is critical to ensure compliance with the GST law. In this article, we have discussed the meaning of supply of goods, inter-state supply of goods under GST, the applicability of IGST on inter-state supplies, and the determination of the place of supply for different types of goods and transactions.
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