Place of Supply of Goods, Controls Applicability of GST

The fundamental principle of GST is that it should effectively tax the consumption of such supplies at the point of consumption rather than at the destination. So, the place of supply provision determines where the tax should be levied. The location of supply determines a transaction’s intra-state or inter-state status. In other words, the place of supply of goods is required to determine whether a supply is subject to SGST plus CGST in a given state or union territory, or if it is an inter-state supply, it is subject to IGST.  

Section 10 of the IGST Act, 2017 regulates the provisions of the place of supply in the case of a goods transaction. Other than goods imported into or exported from India, the place of supply of goods shall be as follows:  

  1. Where the supply of goods involves the movement of goods, whether, by the supplier, the recipient, or any other person, the place of supply of such goods shall be the location of goods at the time when the movement of goods ends for delivery to the recipient. 

    Simplified:
    You send a shipment of goods to Maharashtra while you are in Gujarat. Because the goods are physically delivered to Maharashtra, the location of supply will also be in Maharashtra. The IGST will be levied on transactions where the supply is interstate. 

  2. Where the supplier delivers goods to a recipient or any other person under the direction of a third person, whether acting as an agent or otherwise, before or during the movement of goods, whether by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods. The places of supply of such goods shall be the said third person’s principal place of business.

    Simplified: the ‘Bill to Ship to’ Model

    Mr. Raj, a supplier in Rajasthan, delivered goods to Ms. Twinkle in Gujarat on the orders of Mr. Yash in Madhya Pradesh. This transaction contains two supplies.  

    Supply 1: delivery of goods from the supplier to the person to whom the goods are delivered on the instruction of a third party. The principal place of business of the person on whose instruction goods are delivered to the receiver of goods shall be the place of supply.   

    Supply 2: deemed supply of goods by the person on whose instruction the original supplier delivered the goods to the receiver of goods. The place of supply shall be the location of the goods at the time of delivery to the recipient. 

  3. Where the supply does not involve the movement of goods, whether by the supplier or the receiver, the place of supply is the location of such goods at the time of delivery to the receiver.

    Simplified:  

    Mr. Jay in Kerela ordered a massive generator in his office in Karnataka. The generator is not a deliverable good. Thus, the place of supply, in this case, will be Karnataka.

  4. When goods are assembled or installed on-site, the place of supply is the location of such installation or assembly.  

    Simplified: 

    Ordering a cycle, supplied in parts from Assam are reassembled in Gujarat, in such case the place of supply of a cycle which is ordered but the parts are supplied from Assam will be Gujarat and CGST will be applicable.  

  5. The place of supply for goods on board a conveyance, such as a vessel, an aircraft, a train, or a motor vehicle, shall be the location at which such goods are taken on board.  

    Simplified: 

    The food was served on board the plane that took off from Punjab bound for Goa. The food was served to you while the plane was flying over Delhi. Because the food items were accommodated on the plane in Punjab, the supply location will be Punjab.  

Some Points to Be Noted:

  • Regardless of anything else in this Act, where the supplier’s location is in territorial waters, the supplier’s location; or where the place of supply is in territorial waters, the place of supply shall be deemed to be in the coastal state or union territory where the nearest point of the appropriate baseline is located, as per section 9 of the Act.  
  • Suppose your transactions do not fall into one of the categories listed above. Then, according to section 10(2), the place of supply shall be determined in the manner prescribed by the government.  
  • According to Section 11 of the IGST Act of 2017, the place of supply of goods is:  

-Imported into India shall be the importer’s location.  

-The destination for goods exported from India must be outside of India. 

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