Place of supply of goods under GST

Place of supply of goods under GST

The Goods and Service Tax Act was introduced as a destination based tax i.e. the state in which the goods consumed have the right to collect the amount of tax so it becomes critical to decide in which state the goods have been consumed and consequently who should collect the amount of tax. For solving this issue the concept of ‘Place of Supply’ was introduced both for goods and services. 

Place of Supply when there is movement of goods

Supply Place of Supply
Involves movement of goods, whether by the supplier or the recipient or by any other person  Location of the goods when the movement of goods terminates for delivery to the recipient
Goods are delivered by the seller to a recipient on a direction of a third person, (whether agent or not) before or during movement of goods, by way of transfer of documents of title to the goods or some other way. It is assumed that the third person has received the goods and the place of supply of such goods will be the principal of business of 3rd person.

Place of Supply when there is no movement of goods

Supply Place of Supply
No movement of goods, either by the supplier or the recipient Location of such goods at the time of the delivery to the recipient (at the time of transfer of ownership)
The goods are assembled or installed at site Place of such installation or assembly

Place of supply of goods under GST defines whether the transaction will be counted as intra-state or inter-state, and accordingly levy of SGST, CGST & IGST will be determined. It is governed by section 10 of the IGST Act. 

Section 10: Place of Supply of goods other than imported into or exported from India

  • Section 10(1)(a) : Where the supply involves movement of goods, whether by a supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods where the movement of such goods terminates for delivery to the recipient. For an instance, Mr. A, registered dealer of Delhi, supplied goods to Mr. S, a registered dealer of Mumbai, and Mr. S incurred the delivery charge for picking up the goods from factory of Mr. A. In this case, the place of supply shall be Maharashtra.
  • Section10 (1) (b): Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, it shall be deemed that the location of the third person on whose advise the goods are delivered to the recipient shall be the place of supply of such goods. For an instance , Mr. A, registered dealer of Delhi, supplied goods to Mr. S, a registered dealer of Mumbai, on direction of Mr. B, a registered dealer of Bangalore. Invoice has been issued in the name of Mr. B and the goods are supplied to Mr. S. In such a case, the place of supply of the goods shall be location of Mr. B i.e. Karnataka.
  • Section10(1)(c): Where the supply does not involves movement of goods the place of supply shall be the location of such goods at the time of delivery to the recipient.
    For an instance, B Limited registered in Maharashtra sold its pre-installed transmission tower(electric tower) located at Madhya Pradesh to H. Limited registered in Delhi. In this case, the location of the supplier is Maharashtra, but a place of supply will be Madhya Pradesh. Hence, IGST will be levied.
  • Section10(1)(d): Where the goods are assembled or installed at site, the place of supply of such goods shall be the place of installation or assembly. For an instance, Mr. A, registered dealer of Delhi, prepared AC vents in factory of Mr. S located in Kolkata. In such a case the place of supply is West Bengal.
  • Section10(1)(e): Where the goods are supplied on board a conveyance the place of supply of such goods shall be the location at which such goods are taken on board.
    For an instance, Mr. A is traveling on a cruise liner from Delhi to Goa. He purchases a book from the in-house store in the plane. These books were on-boarded from Mumbai. Registered place of business of the book shop is in Mumbai. In this case, place of supply will be Mumbai.

There could be situations where words in the law may not be defined as delivery but the gist coming from the provisions is something different as the receiver of goods is defined as the person who pays for the goods. Since the government has not come out with new rules to specify place of supply in situations other than the previous ones, it is important to interpret and come to a harmonious conclusion.

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