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Published on:

July 8, 2023

Shaik Musrath

The place of supply for different types of transactions.

In the case of goods being supplied through delivery or movement, the place of supply is typically the location where the goods are delivered to the recipient. However, certain exceptions and special provisions exist for specific situations such as goods delivered on board a conveyance or goods being assembled or installed at the recipient's location.

Similarly, for services, the place of supply can vary based on whether the recipient is a business entity or an individual. It may also depend on the type of service being provided, such as accommodation, transportation, telecommunications, or professional services. In some cases, the place of supply may be determined based on the location of the recipient or the usage of the service.

Place of Supply when Goods are in Movement under GST:

Under GST, the place of supply for goods in movement refers to the location where the movement of goods concludes, leading to the transfer of ownership or where the goods are delivered to the recipient. It is important to determine the place of supply correctly as it determines whether the transaction is considered an intrastate or an interstate supply, and subsequently impacts the levies of SGST, CGST, and IGST.

Principles for Determining the Place of Supply:

The GST law provides specific principles for determining the place of supply when goods are in movement. These principles help ensure clarity and consistency in identifying the tax jurisdiction for such transactions. Let's explore a few scenarios:

Goods Delivered by Supplier:

If the supplier is responsible for delivering the goods to the recipient, the place of supply is typically the location where the delivery is made. For example, if a manufacturer based in Maharashtra transports goods to a buyer in Gujarat, the place of supply would be Gujarat, leading to an interstate transaction liable for IGST.

Goods Delivered to a Third Party on Behalf of the Recipient:

In some cases, the supplier may deliver the goods to a third party as instructed by the recipient. In such instances, the place of supply will still be the location where the goods are delivered to the third party. It is important to note that the recipient's instructions must be communicated prior to the movement of goods.

Goods Delivered on Board a Conveyance:

In certain situations, goods may be delivered on board a conveyance such as a vessel, an aircraft, or a train. The place of supply for such transactions depends on various factors, including the place of commencement of the journey, the destination of the goods, and any agreed-upon points of delivery.

Goods Delivered through a Bill-to-Ship-to Model:

In a bill-to-ship-to model, where the bill recipient differs from the shipping recipient, the place of supply is determined based on the location of the delivery as per the recipient's instructions. It is crucial to maintain proper documentation and ensure that the movement of goods is supported by the corresponding invoices and delivery challans.

Place of supply when goods are not in movement under GST:

When it comes to determining the place of supply for goods, the general rule is that it is the location where the movement of goods takes place. However, there are certain situations where the goods may not physically move, yet a supply still occurs. In such cases, the determination of the place of supply becomes important for tax and regulatory purposes.

To clarify, let's consider a scenario where there is no movement of goods but a supply still takes place. This can occur in various situations, such as:

Virtual goods or digital products:

If you're dealing with digital goods, software, or other electronically supplied services, the place of supply is typically determined based on the location of the recipient or customer.

Immovable property:

In the case of immovable property (e.g., land or buildings), the place of supply is generally the location where the property is situated, irrespective of whether the property physically moves or not.

Services related to goods:

Sometimes, services are provided that are directly linked to specific goods, such as installation, assembly, or maintenance. Even if the goods don't move, the place of supply for these services is typically determined based on the location of the goods at the time when the service is performed.

Place of supply Where Goods supplied :

The implementation of the Goods and Services Tax (GST) in many countries has broughT significant changes in the taxation system, aiming to simplify processes and create a seamless flow of goods and services across states. One of the key concepts in GST is the "place of supply," which plays a crucial role in determining the taxation jurisdiction and the levying of taxes. In this blog post, we will study about the importance of the place of supply of goods in GST and how it affects the levies of SGST, CGST, and IGST.

Defining the Place of Supply:

Under GST, the place of supply of goods refers to the location where the movement of goods comes to an end for the recipient to take ownership or where the goods are delivered to the recipient. The place of supply can vary based on the nature of the transaction, such as whether it involves movement of goods or services or if it is a composite or mixed supply.

Intrastate and Interstate Transactions:

An intrastate transaction occurs when the place of supply and the location of the supplier are within the same state or union territory. In this case, the applicable taxes are the State Goods and Services Tax (SGST) and the Central Goods and Services Tax (CGST). The revenue generated from these taxes is retained by the respective state or union territory.

On the other hand, an interstate transaction takes place when the place of supply and the location of the supplier are in different states or union territories. In such instances, the Integrated Goods and Services Tax (IGST) is levied, which is a combination of both the CGST and the SGST. The revenue generated from IGST is then shared between the states involved in the transaction.

Determining the Place of Supply:

The GST law provides clear guidelines for determining on a vessel/conveyance:

When goods are supplied on a vessel or conveyance, determining the place of supply can be a bit more complex. The rules for determining the place of supply in such cases can vary depending on whether the supply involves transportation of goods or the use of a vessel or conveyance for other purposes.

Here are a few scenarios and general guidelines to consider:

Supply of goods during international transportation:

If the goods are supplied during the course of international transportation (e.g., goods being transported from one country to another), the place of supply is typically determined based on the destination of the goods. In other words, it is the location where the goods are ultimately delivered or intended to be delivered.

Domestic transportation within a country:

If the supply of goods occurs during domestic transportation within a country, the place of supply is generally determined based on the location where the transportation begins. This means that the supply is considered to take place in the country where the transportation originates.

Supply of goods for other purposes on a vessel/conveyance:

If the goods are supplied on a vessel or conveyance for purposes other than transportation (e.g., catering services on a cruise ship or sales of goods on board an aircraft), the place of supply is typically determined based on the location where the vessel or conveyance is located at the time of supply. This could be the port, airport, or any other designated location.

Place of supply – Imports and exports:

When it comes to determining the place of supply for imports and exports, different rules apply depending on whether you are referring to goods or services. Let's look at each case separately:

Place of supply for imported goods:

Import of goods refers to bringing goods into a country from another country.

The place of supply for imported goods is typically the location where the goods are cleared through customs or where the importation process takes place.

This means that the place of supply for imported goods is usually the country where the goods are being imported into.

Place of supply for exported goods:

Export of goods refers to sending goods from one country to another.

The place of supply for exported goods is generally the location where the goods are located at the time they begin their journey to the destination country.

In other words, the place of supply for exported goods is typically the country from where the goods are being exported.

Place of supply for imported and exported services:

For services, the place of supply rules can vary depending on the type of service being provided.

In the case of imported services (services received from another country), the general rule is that the place of supply is the location of the recipient of the service. This means that if you import a service, the place of supply would be your own country.

For exported services (services provided to another country), the place of supply rules depend on the specific type of service. Commonly, the place of supply is considered to be the location of the recipient of the service, but certain services may have different rules. It is important to consult the specific regulations of the countries involved to determine the accurate rules for the particular service.

Conclusion:

The concept of place of supply is of paramount importance in the GST framework, as it determines the tax jurisdiction and the levies applicable to a transaction. By implementing a destination-based taxation system, GST aims to streamline the movement of goods and services across states and ensure that the state where consumption occurs receives the tax revenue. Understanding the nuances of the place of supply is crucial for businesses and taxpayers to comply with GST regulations and accurately determine their tax liabilities.