Place of Supply of Goods under GST

Goods are usually tangible and there will be no difficulty in determining their place of supply consumption whereas Services, being intangible, pose various difficulties in determining the place of supply. Few factors for such difficulties are,

1. The manner of delivery of service could be altered easily. For instance, the billing address of a customer of a Telecom service provider can be changed easily.
2. Service provider, service receiver, and the service provided may not be ascertainable as no tangible items move.
3. A fixed location of the service provider is not mandatory for both supplier of service and also the recipient of service.

Considering the difficulties in determining the actual place of supply of services, the various elements involved in a service transaction can be used for determining the place of consumption or place of supply of such services. These elements which give more exact results than others for determining the place of supply. The elements used for determining the place of supply of service are:

• Location of the service provider
• Location of service receiver
• Place where the activity takes place
• Place where the service is consumed
• The place to which the actual benefit flows / Person to whom the actual benefit flows

These elements are the proxies that can be used to determine the actual place of supply of services.

Separate rules for determining the place of supply in respect of B2B and B2C transactions

In the case of B2B transactions, the supply is made by a registered person to another registered person, and the taxes paid are taken as credit by the recipient. GST collected on B2B supplies becomes the liability for the Government as the same acts as an asset for the recipient of such supply. The recipient uses the Input Tax Credit (ITC) for paying his future taxes.

In the case of B2C transactions, the supply is made to the unregistered person who consumes the same and the taxes paid actually reach the Government.

Why place of supply is important?

The determination of place of supply or location of supply is essential to ascertain the nature of supply i.e. whether a supply is interstate or intrastate. These two factors are required to determine whether a supply is subject to CGST and SGST / UTGST in the case of Intrastate supply or subject to IGST in the case of Interstate supply.

In an inter-state transaction is wrongly treated as intra-state supply or in other cases and the tax is paid accordingly, the correct tax will need to be paid to refund the amount which is claimed wrongly. Hence, determining the correct place of supply or location of supply is important.

Determination of supply of goods in case of domestic transactions

This deals with the following specific situations.

• Supply involving the movement of goods
• Goods delivered on ‘Bill to’ ‘Ship to’ basis
• Supply not involving the movement of goods
• Goods assembled or installed at the site
• Goods supplied on board a conveyance

Supply involving movement of goods [Section 10(1)(a)]

In this case, the place of supply is the location of the goods at the time when the movement of goods ends for delivery to the recipient. The movement can be undertaken by the supplier or recipient or any other person like transporter but the place of supply is declared at the time when the goods are taken out for delivery from the supplier.

GST is furthermore categorized based on states and union territories,

• This provision does not apply in cases where there is no movement of goods
• This provision does not apply to include the transfer of property and only for the movement of goods.

Karan & Co. of Tamil Nadu sells 20 refrigerators to ABC Limited in Ahmedabad for delivery at their place. The place of supply in this case is Ahmedabad.

Goods delivered on Bill to Ship to basis [Section 10(1) (b)]

These are supplies involving the movement of goods where goods are delivered to the recipient on the instruction of a third party. This section lays down the provisions to determine the place of supply in cases where there is a tri-party arrangement of supply, commonly known as ‘bill to ship to’ transactions. Where goods are delivered by the supplier to the recipient (original buyer) at the instruction of the third person, the place of supply is the principal place of business of the third person and not the actual recipient or the original buyer.

• Two supplies occur in this case i.e. supply by the supplier to the third person and by the third person to the recipient.
• This provision deals only with the first set of transactions i.e. supply by the supplier to the third person.

Supply not involving movement of goods [Section (10) (c)]

If the supply does not involve the movement of goods, the place of supply is the location of goods at the time of delivery to the recipient.

A Limited (Mumbai) leases its machine to B Limited (Chennai) for the production of goods. After a period of time, B Limited requested A Limited to sell the machine to it. A agreed and sold to B. In this case, there will be no movement of goods and the same will be sold. Thus, the place of supply will be the location of the machine at the time of its sale i.e. Chennai.

Supply involving installation or assembly of goods [Section 10(1) (d)]

If the supply involves goods that are to be installed or assembled at the site, the place of supply is the place of such installation or assembly.

Rahul (Chennai) buys an Air Conditioner from MKR Limited (Mumbai) which is to be installed in his office located in Kerala. Here the place of supply is Kerala as the installation occurs in Kerala though Rahul resided in Chennai.

Goods supplies on board for conveyance [Section 10(1) (e)]

This means the supply of goods during a journey. When goods are sold/supplied during a journey, it becomes difficult to determine the place of supply - whether it is the location from the journey begun or the destination of the journey. This section states that the place of supply for such supplies like aircraft, trains, motor vehicles is the location where such goods have been on board.

Place of supply under this case is determined even if the supply has been made by any of the passengers onboard and not by the carrier of the conveyance.

Mr. X (New Delhi) boards the Delhi – Kota train at New Delhi. He sells the goods taken by him at New Delhi, on the train at Jaipur during the journey. The place of supply is the location at which the goods are taken on board i.e. New Delhi and not Jaipur where they are sold.

Place of supply of goods Imported to or Exported from India

Import of goods: All import of goods are to be treated as Inter-state supply and IGST tax is levied in addition to applicable customs duties.
If goods are imported, the place of supply of goods is the place where the importer is located.

Export of goods: Exports are treated as inter-state supply and zero-rated supply where the exported goods are relieved of GST levy.
In this case, the place of supply is the place where they have been exported i.e. the destination of supply (Outside India)

Place of supply of service within India

This explains the case where the location of the supplier of service and the recipient of service is in India. The place of supply of services differs in the supply of services based on the nature of service availed and the location of supply of such service.

The place of supply of services made to an unregistered person is the location of the person receiving the services.

If supplied to unregistered persons, the place of supply would be the location of such unregistered person if his address is available or the location of the supplier of services if the address is not available.

Place of supply of services outside India

In the case of export of services, the place of supply of such services is the location of the recipient of services. However, if the location of the recipient is not available, the place of supply is the location of the supplier of services.