How to determine the Place of Supply in GST? A brief Guide by GST Consultants

Explore the critical concept of Place of Supply under GST in India, determining tax applicability as CGST/SGST or IGST. Learn about key provisions of the CGST Act, with examples and compliance GST Consultants in udaipur .

Introduction

The concept of Place of Supply (PoS) is a cornerstone of the Goods and Services Tax (GST) framework in India. It determines the jurisdiction in which GST is to be levied and whether a transaction attracts Central GST (CGST) and State GST (SGST) or Integrated GST (IGST). Understanding these rules is crucial for ensuring accurate compliance and determining the revenue source for either the central or state government. This blog explains the fundamentals of PoS, supported by sections of the Central Goods and Services Tax Act, 2017 (CGST Act), along with illustrative examples.

Basic Rule for Place of Supply

Under GST, the determination of PoS follows a systematic approach:

  1. Identify the location of the supplier.
  2. Identify the location of the recipient.
  3. Determine the place where the supply of goods or services occurs.
  4. If the supplier and recipient are in the same state, it is treated as an intra-state supply and attracts CGST and SGST.
  5. If they are in different states, it is treated as an inter-state supply and attracts IGST.

Relevant Sections:

  • Section 10 and 11 of the IGST Act for goods.
  • Section 12 and 13 of the IGST Act for services.

Place of Supply Rules for Goods

1. Supply Involving Movement of Goods

When goods involve movement, whether by the supplier, recipient, or any other person, the place of supply is the location where the movement terminates for delivery to the recipient.

Example 1: Intra-State Supply
Mr. Raj of Mumbai, Maharashtra, sells 10 TV sets to Mr. Vijay in Nagpur, Maharashtra.

  • Place of Supply: Nagpur, Maharashtra.
  • GST Applicable: CGST and SGST (as it is an intra-state transaction).

Example 2: Inter-State Supply
Mr. Raj of Mumbai, Maharashtra, sells 30 TV sets to Mr. Vinod in Bangalore, Karnataka.

  • Place of Supply: Bangalore, Karnataka.
  • GST Applicable: IGST (as it is an inter-state transaction).
2. Delivery to a Third Party

When goods are delivered to a buyer on the instructions of a third party, the place of supply is deemed to be the principal place of business of the third party.

Example 3: Third-Party Instruction
Anand in Lucknow buys goods from Mr. Raj in Mumbai, Maharashtra, and requests the goods to be delivered to Nagpur, Maharashtra.

  • Place of Supply: Lucknow, Uttar Pradesh (Anand’s location).
  • GST Applicable: IGST.
3. Ex-Factory Sales

If the recipient arranges their transportation and collects the goods from the factory, the PoS is where the goods are delivered to the recipient.

Example 4: Receiver Takes Goods Ex-Factory
Mr. Raj of Mumbai, Maharashtra, receives an order for 100 TV sets from Sales Heaven Ltd. in Chennai, Tamil Nadu. Sales Heaven arranges its own transportation and collects the goods from the factory.

  • Place of Supply: Chennai, Tamil Nadu.
  • GST Applicable: IGST.
Place of Supply Rules for Goods Without Movement

When there is no movement of goods, the PoS is the location of the goods at the time of delivery.

Example 1: No Movement of Goods
Sales Heaven Ltd. (Chennai) opens a new showroom in Bangalore and purchases a building with pre-installed workstations from ABC Realtors (Bangalore).

  • Place of Supply: Bangalore, Karnataka.
  • GST Applicable: CGST and SGST.

Example 2: Installation of Goods
Strong Iron & Steel Ltd. in Jharkhand contracts M/s SAAS Constructions (West Bengal) to build a blast furnace at their steel plant in Jharkhand.

  • Place of Supply: Jharkhand.
  • GST Applicable: CGST and SGST.
Place of Supply Rules for Goods on Conveyance or Vessel

When goods are supplied on board a conveyance, such as a vessel, train, aircraft, or motor vehicle, the place of supply is the location where the goods are taken on board.

Example 1: Air Travel
Mr. Ajay travels from Mumbai to Delhi by air and purchases snacks on board. The airline is registered in both Mumbai and Delhi.

  • Place of Supply: Mumbai (location where goods were taken on board).
  • GST Applicable: CGST and SGST.

Example 2: Train Travel
Mr. Vinod travels to Mumbai via train. The train starts in Delhi, and Mr. Vinod boards at Vadodara (Gujarat). He purchases lunch loaded in Delhi.

  • Place of Supply: Delhi.
  • GST Applicable: CGST and UTGST (Union Territory GST).
Place of Supply Rules for Services

The rules for determining the PoS for services depend on whether the recipient is registered under GST and the nature of the services.

1. General Rule
  • If the recipient is registered, the PoS is the location of the recipient.
  • If the recipient is unregistered, the PoS is the location of the supplier.
2. Specific Provisions for Services
  • Immovable Property: Location of the property.
  • Performance-Based Services: Location where the services are performed.
  • Telecommunication Services: Billing address of the recipient.

Example: Construction Service
M/s Builders in Delhi provides construction services to a property in Jaipur, Rajasthan.

  • Place of Supply: Jaipur, Rajasthan.
  • GST Applicable: CGST and SGST.
Unspecified Place of Supply

If the PoS cannot be determined, it will be decided based on rules formulated by the GST Council and Parliament recommendations.

Compliance Implications and Challenges
  1. Record Maintenance: Businesses must maintain accurate records of supplier and recipient locations.
  2. Matching Invoices: Ensure proper reconciliation of GST returns to avoid mismatches.
  3. Understanding Rules: Correctly identifying PoS helps avoid penalties and ensures smooth GST audits.
Conclusion

The concept of Place of Supply is pivotal in determining the type of GST applicable and ensuring compliance with GST laws. By understanding the rules laid out in the CGST and IGST Acts, businesses can minimize errors and optimize their tax liabilities. At Udaipur GST Consultant in udaipur , we provide expert guidance to navigate the complexities of GST, ensuring your business remains compliant and efficient. Reach out to us to unlock the full potential of GST provisions and safeguard your financial interests.

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