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Place of Supply of Goods under GST

gst place of supply

Goods and Services Tax (GST), one of the biggest indirect tax reforms in India, is a destination-based tax system or a consumption-based tax system which means the consuming state will collect the GST whereas producing state and/or selling state will get nothing.

It becomes imperative to know the concept of “Place of Supply” for the payment of CGST, SGST, and IGST. The provisions regarding the place of supply of goods and services are provided in sections 10 to 13 of the Integrated Goods and Services Act 2017. In this article, we are going to discuss the concept of the place of supply of goods under GST.

Place of Supply of Goods

Section 10 of IGST Act provides for the provisions regarding the determination of the place of supply of goods in different conditions:

Where the supply involves the movement of goods

As per clause (a) of section 10(1), [1]where the supply involves the movement of goods, place of supply shall be the location of the goods at the time when the movement of goods terminates for delivery to the recipient. The place of supply of goods is the place where the movement of goods terminates for delivery.

Example

Intra-state

A company or a person ‘X’ located in Mumbai, Maharashtra receives an order from a company or a person ‘Y’ located in Mumbai, Maharashtra for the supply of steel.

Place of Supply: Mumbai, Maharashtra

GST: CGST + SGST

Interstate

A company or a person ‘X’ located in Lucknow, U.P. receives an order from a company or a person ‘Y’ located in Mumbai, Maharashtra for the supply of steel.

Place of Supply: Mumbai, Maharashtra

GST: IGST

Ex-works

A company or a person ‘X’ located in Lucknow, U.P. receives an order from a company or a person ‘Y’ located in Mumbai, Maharashtra for the supply of steel. But the cost of transportation will be carried by Y. In this case, the movement of goods takes place as per the direction of the purchaser i.e. Y.

Place of Supply: Mumbai, Maharashtra

GST: IGST

Because the section provides that the place of supply of goods would be the place where the movement of goods terminates for delivery to the recipient. Thus, in this case, the place of supply would be Mumbai, Maharashtra.

The place of supply is required to be filled in Table-4 of GSTR-1.

Where the goods are delivered by the supplier to a recipient or any other person as per the direction of the third person

As per clause (b) section 10(1), the goods delivered to any person as per the direction of the third person, the place of supply will be the location of the third person.[2]

Example

Mr A in Mumbai purchases goods from Mr B in Varanasi. Mr A directs Mr B to deliver the goods to Mr Z in Lucknow. In this case, even though the delivery of goods takes place in Lucknow. As per the section, Mr A in Mumbai under whose direction the goods have been delivered will be considered as the recipient of goods.

Place of Supply: Mumbai, Maharashtra

GST: IGST

Where the supply does not involve the movement of goods

Clause (c) of section 10(1) provides for the determination of the place of supply when supply does not involve the movement of goods.[3] The ownership of goods is changed without involving the transfer of goods.

Example

Company A in Mumbai leases its factory located in Mumbai to company B located in Chennai. In this case, ownership of the factory is transferred without involving the movement of goods.

Place of supply: Mumbai

GST: CGST + SGST

Where the goods are assembled or installed at the site

Clause (d) of section 10(1) provides [4]when the goods are assembled or installed at the site, the place of supply of such goods shall be the place of installation of goods will be the place of supply of goods irrespective of the location of buyer and seller.

Example

Mr A, located in Mumbai, places an order on Mr B for the installation of a generator in his factory located in Lucknow, U.P.

Place of supply: Lucknow, U.P.

GST: IGST

Where the goods are supplied on the conveyance

Clause (e) of section 10(1) provides for the place of supply of goods will be the place where the goods are located in train or vessel or aircraft.[5]

Example

Mr A supplies goods on a train that goes from Mumbai to Delhi. Mr A loaded the goods on the train in Mumbai.

Place of supply: Mumbai, Maharashtra

GST: CGST+SGST

In this case, as per clause (e) of section 10 (1), the place of supply of goods would be Mumbai irrespective of the places where the actual consumption of goods will take place.

Place of Supply for Import and Export

Section 11 of the IGST Act provides for [6]determination of the place of supply of goods imported into or exported from India.

Sub-section (1) provides that the place of supply of imported goods shall be the location of the importer. Sub-section (2) provides that the place of supply of export goods shall be the location outside India.

When goods are being imported

Company X located in Mumbai import machines from Company Y located in China.

Example

Place of supply: Mumbai, Maharashtra

GST: IGST

When goods are being exported

Company X located in Mumbai export machines from Company Y located in China.

Example

Place of supply: China

GST: Exempted

Conclusion

Every transaction between the states or within the state needs to go through the test of provisions relating to the Place of Supply which plays a pivotal role in determining the payment of CGST, SGST, and IGST under the GST regime. It has brought more clarity and accurateness regarding the location of the place where GST is to be levied.

[1] The Integrated Goods and Services Tax 2017, s 10(1) (e). <http://gstcouncil.gov.in/sites/default/files/IGST.pdf>

[2] Ibid, s 10(1) (b).

[3] Ibid, s 10(1) (c).

[4] Ibid, s 10(1) (d).

[5] Ibid, s 10(1) (e).

[6] The Integrated Goods and Services Act 2017, s 11. <http://gstcouncil.gov.in/sites/default/files/IGST.pdf>

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