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    PLACE OF SUPPLY OF GOODS

    The place of supply provisions determines whether the supply transaction is Inter-State or Intra-State. Depending upon the type of transaction, the tax to be levied is either IGST or CGST and SGST/UTGST. Hence, every transaction involving supply of goods will have to go through the test of provisions relating to place of supply of goods in order to determine which tax is to be levied. Thus, under GST Regime, the place of supply is not only relevant for services but also for the supply of goods. In this article, we shall be discussing on provisions relating to place of supply for goods. 

    In GST, the manner in which a supply is to be determined as Inter-State Supply or Intra-State supply has been provided in the Integrated Goods and Service Tax Act, 2017.To determine whether a transaction is an Intra-State or Inter-State, we have to identify two aspects i.e., location of Supplier and the place of supply. Where the location of supplier and the place of supply is within the State/Union territory then the transactions is said to be an Intra-State transactions and where the location of supplier is in one State/Union territory and the place of supply is in another State/Union territory, then the transactions is said to be an Inter-State transaction. The Imports and Export transactions are always considered as Inter-State Supplies. Similarly, the supply to SEZ units or developer is always treated as Inter-State transaction even the location of supplier and place of supply are in same State.

     

    Coming to provisions relating to Place of Supply of Goods, the transactions relating to other than export and import of goods is clearly defined in the Section 10 of Integrated Goods and Services Tax Act, 2017 and the transactions relating to export and import of goods is clearly defined in the Section 11 of Integrated Goods and Services Tax Act, 2017.

    Place of Supply of Goods – An Overview

    Place of

    Supply of

    Goods

     

     

     

    Other than

     

     

    Export and

     

     

     

     

    Exports and

     

     

    Import of

     

     

     

    Imports of Goods

     

     

    Goods

     

     

    Movement

    Movement on

    No Movement

    Goods are

    Supplied on

     

     

     

    direction

    Import

    Export

     

    of Goods

    of Goods

    Assembled at

    Board

    of third person

    Site

     

     

     

     


    Transactions where place of supply of goods supplied otherwise than by way of imports and exports, are divided into five types.

    1. Supply involving movement of goods from one location to another
    2. Supply undertaken on the direction of third person
    3. Supply without involving movement of Goods
    4. Supply requiring the goods being assembled at site
    5. Supply of goods on board a conveyance

     

    1. Movement of Goods: 

    As per Section 10(1)(a), “where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient”.

    It implies that where the supply involves movement of goods from one location to another location, the place of supply of such goods shall be the place where the movement of goods is terminated for delivery to the recipient.

    For example, Ramya Enterprises of Gujarat gets an order of 150 flower vases from Chandra Enterprises who is located in Assam. Chandra enterprises visited Ramya Enterprises and took the delivery of 150 flower vases at their factory in Gujarat. Chandra Enterprises, upon taking delivery of goods, arranged transportation to move the goods to their shop in Assam. In this transaction, the movement of goods commences in Gujarat when flower vases were taken and transported to Assam and terminates at the shop of Chandra Enterprises where the flower vases are delivered. In this case, as the movement of goods is terminated at the shop in Assam, the place of supply is Assam. As the supplier, Ramya Enterprises is located in Gujarat and place of supply is in Assam, the supply shall be treated as Inter-State Transaction and accordingly, IGST will be charged.

    1. Movement on the direction of third person

    As per section 10(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, before or during movement of goods, either 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 and the place of supply of such goods shall be the principal place of business of such person".

    It implies that where the goods are delivered by the supplier to a recipient or any other person on the direction of third person, the place of supply will be the location of such third person and not where the delivery terminates.

    For example, Ravi raja Traders, a dealer in leather bags, located in Mumbai, receives an order from Hyper Traders, also located in Mumbai. The order is for supply of 100 bags, with an instruction to ship the bags to Global bags, who is located in Uttar Pradesh. Global bags is a customer of Hyper Traders. 

    There are two parts in this transaction

    • Firstly, Ravi raja Traders is a supplier of leather bags and Hyper Traders is a buyer. In this case, Ravi raja traders bills the transaction to the Hyper Traders, whereas Hyper Traders instructs Ravi raja Traders to ship the goods to Global bags.
    • Secondly, Hyper Traders are the supplier and the Global bags are the buyer. Here, Hyper Traders bills transaction to Global bags and endorses a copy of Consignment note (goods shipped in a courier by Ravi raja Traders) in favour of Global bags. This Consignment note will enable Global bags to take the delivery of the goods. 

    In this case, on the instruction of Hyper Traders, Ravi raja traders ship the goods to Global bags. Here, Hyper Traders is deemed as third person. Therefore, the place of supply will be the principal place of business of the third person, i.e., Mumbai. Accordingly, Ravi raja Traders charges CGST and SGST on billing to Hyper Traders even though the goods are moved to Uttar Pradesh. The second part of the transaction between Hyper Traders and Global bags will be interstate, and IGST will be charged accordingly [as per Section 10(1)(c)].

    • No Movement of Goods 

    As per Section 10(1)(C), “where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient”.

    It implies that where supply doesn’t involve movement of goods the place of supply of such goods is the location where the goods are made available to the recipient. 

    For example, Yojana Limited registered in Maharashtra sold its Uni pole which is located at Madhya Pradesh to Vajra Limited registered in Delhi. Uni pole is nothing but goods which can be moved from one location to another location. However, the nature of supply is such that it does not require the movement of goods as the buyer, Vajra Limited is also intending to use this Uni Pole in Madhya Pradesh at the site of its erection. In this case, the supply does not involve movement of goods. Therefore, the place of supply shall be the location of goods i.e. Madhya Pradesh.As supplier, Yojana Limited is located in Maharashtra and place of supply is in Madhya Pradesh, the supply shall be considered as inter-state and accordingly IGST shall be charged.

    1. Goods are assembled/installed

    As per Section 10(1)(d), “where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly”.

    It implies that where the goods are installed/assembled at a place, then place of supply shall be the place where the installation or assembly has been undertaken 

    For example, Mr. A who is registered in Telangana entered into a contract with Mr. B of Tamil Nadu for installation of solar panels for his new office in Mumbai. Here, the solar panels are installed at Mumbai office. In this case, the place of supply is Mumbai as the solar panels are installed in Mumbai. 

    1. Supplied on board 

    As per Section 10(1)(e), “where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board”.

    It implies that where the goods are supplied on board a conveyance or by any other means, the place of supply in that case is where such goods are taken on board.

    For example, Refreshments were supplied on board in an aircraft proceeding from Chennai to Delhi. It had a stop at Hyderabad. The refreshments were taken on board at Hyderabad. The place of supply in this case is Hyderabad.

    • As per Section 10(2), “Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed”.

    In such case, the government will fix the manner to determine the place of supply of such goods. 

    Place of supply of goods in case of Exports and Imports of goods:

    Before going into the provisions with respect to exports and imports, let us know how understand how the terms are in GST law. The terms ‘Export of goods’ and ‘Export of services’ are separately defined in IGST Act, 2017.Similarly, the terms‘Import of goods’ and ‘Import of services’ are also separately defined in IGST Act, 2017.

    As per Section 2(5) of IGST Act, 2017, “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.

    It implies that the export of goods means taking goods from a place in India to a place outside India. 

    As per Section 2(10) of IGST Act,2017, “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India. 

    It implies that the Import of goods means bringing goods to a place in India from a place outside India.

    Place of supply provisions relating to Export and Import of goods are: - 

    • As per Section 11(a),“The place of supply of goods, imported into India shall be the location of the Importer”.

    It implies that in case of Import of goods, place of supply is location of the importer in India i.e., principal of business or the additional place of business. 

    For example, Continental Coco Limited which is located in Andhra Pradesh imports raw material from Indonesia. The goods are cleared from Customs at Mumbai Port. In this case, though the goods are imported in Mumbai (Maharashtra), place of supply is Andhra Pradesh as it is the location of the importer. 

    • As per Section 11(b), “The place of supply of goods, exported from India shall be the location outside India”.

    It implies that in case of export of goods, place of supply is the location outside the place of India.

    For example, Continental Coco limited export the finished goods to England. Here, place of supply is England, which is outside India.

    Conclusion: 

    In view of the above discussion, ‘determination of place of supply’ is sine qua non to determine the applicable type of GST tax i.e. IGST or CGST&SGST. Thus, the place of supply shall be required to be determined on the basis of the principles enumerated above.

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