Place of supply in GST
A brief summary of Place of Supply under GST
In this post, we will look at the importance of the place of supply in GST, where goods and services are supplied under various scenarios, and how this affects taxable transactions.
Let’s look at each section in more detail:
What is place of supply in GST ?
According to the GST Law, the place of supply is the place of the recipient of goods or services. Typically, this is the recipient’s registered address. However, many types of transactions have different methods to determine the place of supply and the corresponding tax rate.
Legal Framework
Sections 10-14 of Chapter V of the IGST Act explain the provisions regarding the place of supply of goods and services.
1, Section 10: Place of supply of goods other than those imported into or exported from India
2, Section 11: Place of supply of goods imported into or exported from India
3, Section 12: Place of supply of services where the supplier and recipient are located in India.
4, Section 13: Place of supply of services where the supplier’s or recipient’s location is outside of India
5, Section 14: A special provision for tax payment by a supplier of online information and database access or retrieval services.
Importance of place of supply
The place of supply influences which tax to charge. IGST is charged on interstate supply, whereas CGST and SGST are charged on intrastate supply. The location of the supplier and the place of supply determine whether the supply is interstate or intrastate.
If the supplier and the place of supply are in different states, it is considered an interstate supply, and IGST applies. If they are in the same state, it is considered an intra-state supply, and CGST and SGST/UTGST are applicable.
Table 1:
|
Case |
Location of Supplier |
Place of Supply |
Same State? |
Inter-State/Intra-State |
|
1 |
Kerala |
Bihar |
No |
Inter-State (IGST) |
|
2 |
Puducherry |
Puducherry |
Yes |
Intra-State (CGST & Puducherry GST) |
|
3 |
Chandigarh |
Chandigarh |
Yes |
Intra-State (CGST & UTGST) |
|
4 |
Chandigarh |
Punjab |
No |
Inter-State (IGST) |
|
5 |
Chandigarh |
Daman & Diu |
No |
Inter-State (IGST) |
|
6 |
Goa |
Goa |
Yes |
Intra-State (CGST & Goa GST) |
|
7 |
Karnataka (SEZ) |
Karnataka (SEZ) |
Special case |
Inter-State |
Understanding these terms and how to identify them is important.
Place of supply for goods under different scenarios
- When goods are transported between two locations, the point of supply is where they are delivered.
- When a seller supplies goods to another person at the direction of a third party, the place of supply is the third party’s location rather than the place of delivery.
Example: If you purchase a gift and send it to a friend through Amazon, the point of supply is your address, not your friend’s. - When goods are not moved by the seller or buyer during a transaction, the place of supply is the location where they are delivered to the buyer.
- The location at which items are assembled or installed by the seller is usually referred to as the place of supply.
- When items are delivered to a ship, airplane, bus, or other mode of transportation, the place of supply is the location where the goods are loaded.
- When items are imported into India, the point of supply is the importer’s location. When goods are exported from India, the place of supply is the delivery destination outside of India.
Place of supply for services under different scenarios
General Rules
- If both the service provider and recipient are registered taxpayers, the place of supply is the recipient’s location.
- If a registered taxpayer provides services to an unregistered person, the place of supply is the consumer’s location if their address is on the invoice. If the consumer’s address is not available, the place of supply is the supplier’s location.
Place of the supply for specific services is not covered by general rules.
|
Service |
Place of Supply |
|
Immovable property services include construction, interior decoration, and maintenance of houses, offices, houseboats, and so on. Also includes services linked to events held at these locations. |
The location of the property. |
|
Admission services for events (artistic, educational, entertainment, and so on, including theatres and theme parks). |
The location where the event will take place. |
|
Services for event organisation and management. |
For B-to-B transactions: The recipient’s location. For B to C transactions: The location of the event. |
|
Goods transportation services. |
For B-to-B transactions: The recipient’s location. For B to C transactions: The location where the products are delivered. |
|
Passenger transportation services. |
For B2B transactions: The recipient’s location. For B-to-C transactions: The location where the passenger boarded the vehicle. |
|
Transportation services (air, road, rail, and sea). |
The starting location for the journey. |
|
Telecommunications and media services. |
Fixed lines, dish antennas, and leased internet circuits: Where these entities have been installed. Post-paid communication: The recipient’s address. Pre-paid communication: The location of the selling agent or the collection point for payment vouchers. In all other circumstances, specify the recipient’s or supplier’s location. |
|
Banking, stock brokerage, and other financial services. |
Location of the recipient or provider (if recipient information is missing). |
|
Insurance services. |
Location and address of the recipient on the invoice(s). |
Place of supply for import and export of services from/to a location outside India
- In most transactions, the place of supply is the location of the service recipient. If this location is not available, the supplier’s location is used.
- If goods are imported into India for service and then shipped back, the place of supply is outside India, as long as the goods are not used in India.
- For remote services (such as electronic after-sales support) provided to a recipient outside India, the place of supply is the actual location of the goods.
- The place of supply for the following services is the supplier’s location:
- Services provided by a banking or financial institution to its account holders
- Intermediary services (as given by brokers)
- Renting transport (including yachts but excluding aircraft and vessels) for up to one month.
- The place of supply for online information and database access or retrieval services is the recipient’s location.
Place of Supply in Specific Scenarios
Inter-State Supplies:
The recipient’s location is the place of supply for interstate supplies subject to GST. The recipient pays the Integrated Goods and Services Tax (IGST) on these transactions. Special rules may apply to particular goods and services. For example, For transportation services, the place of supply is the location where the items are handed over for transportation.
Intra-State Supplies:
For intra-state GST supplies, the place of supply is the supplier’s location. Depending on whether the supply is made within a state or a union territory, the provider is required to pay State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), or Union Territory Goods and Services Tax.
Exports and Imports:
Imports are supplied from the importer’s location, and IGST is charged. For exports, the place of supply is outside of India, and GST on exports is refunded because there is no GST.
E-commerce Transactions:
The location of supply for GST-registered e-commerce transactions varies depending on the transaction type. If the e-commerce provider just serves as a conduit for supply, the supplier’s location is the place of supply. If the e-commerce operator is the provider, the supply place is the operator’s location.
Impact of the place of supply on your taxable transactions
A. Calculation of GST
The place of supply affects GST calculation by deciding the tax rate. The rate changes depending on whether the transaction is intrastate or interstate. Businesses must appropriately identify their place of supply in order to determine their GST due.
B. Payment of GST
The place of supply has an impact on GST payment as well. The provider is liable for paying intrastate CGST, SGST, or UTGST. Interstate supplies are subject to IGST. Payments must be made on time to avoid paying interest and penalties.
C. Input Tax Credit
The place of supply determines the availability of Input Tax Credit (ITC). Businesses can claim the ITC on GST paid for purchases made for business purposes. However, for interstate supplies, the ITC can only be utilised to offset the IGST liability. To claim ITC, you must correctly identify the place of supply.
D. Filing of GST Returns
The location of supply influences how GST returns are filed. Businesses must file GSTR-1 and GSTR-2 for supplies. Accurate reporting of the place of supply guarantees accurate taxable value and GST liability reporting, preventing penalties or refund rejections.
Conclusion
The place of supply is essential in the GST tax system. It ensures accurate taxation and helps to prevent penalties or legal complications. Understanding these standards enables firms to maintain compliance, minimise errors, and increase performance. For both local and foreign transactions, correctly defining the place of supply reduces risks, promises timely tax payments, and avoids potential issues.
FAQs
1. What role does the site of supply have in the GST?
Ans: The GST component is decided by the place of supply, which includes IGST, CGST, UTGST, and SGST. Also, it helps the computation of the tax owed and, if appropriate, the input tax credit.
2. What is the place of sale or purchase for immovable property?
Ans: In terms of property, the location of the property in question is the ultimate source of supply.
3. What is a place of supply for educational services?
Ans: In this scenario, the place of supply is the location where education is delivered, i.e., the registered address of a school, institution, etc.
