The term ‘place of supply’ is very significant, as far as the Goods and Services Tax Laws are concerned. GST revolves around the concept of ‘Destination based consumption tax. Therefore, for every transaction of supply of goods or services or both, it is immensely important to determine as to at which location, the consumption of goods or services has taken place. For every transaction it is necessary to determine the “Place of Supply’ and the place of supply should be in accordance with the provisions of the law.
The definition of the word ‘Place of Supply’ has been given under Section 2 (86) of the CGST Act 2017. “place of supply” means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act. Taking a further reference to Section 10,11,12 and 13 respectively of the Integrated Goods and Services Tax Act 2017, the term Place of supply can be better understood. Given the fact that GST is a destination-based consumption tax and every state, holds a legislative power to collect tax in respect of state specific transaction, there was a need to lay down certain principles in determination of ‘Place of Supply’ which would be applicable across all the states. This would bring in uniformity. The provisions of IGST Act have not been given under the state GST Laws, but only in the Integrated Goods and Services Tax Act 2017. It may be possible, in case of a specific transaction, there might be more than 1 states be involved. There may be a situation that each of the states would assume consumption of supply in its state and accordingly claim stake for the revenue.
- Determination of Place of Supply of Goods (other than in case of Imports and Exports)
According to the provision of Section 10(1) of the IGST Act 2017, The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,
(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;
Eg: Amrita Ltd (Mumbai) has entered into a contract to sell certain goods to Prerna Ltd (Surat) for an agreed price. As per the terms of contract the termination of delivery was to take place at the factory of Prerna Ltd. The goods were to be carried by transporter arranged by Prerna Ltd but cost was borne by Amrita Ltd.
In such case, the place of supply would be determined, considering which place would be considered as place of ‘termination of delivery’. In the given case, since the delivery would terminate in Surat, as per the terms of contract, therefore the ‘Place of supply’ would be Surat. As a reason of this the ‘Location of Supplier’ would be ‘Mumbai Maharashtra’ and the ‘Place of Supply’ would be Surat (Gujarat), thus IGST would be levied in the given case.
(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;
The transactions covered under clause (b) of Section 10(1) are often referred to as “Bill to Ship to” transactions. It often can be seen in case where a trader of goods, who only intends to buy and sell the goods as it is, without making any modifications. In such case the trader per-se does not take the delivery of goods, he only takes a constructive delivery but not physical delivery ie he only procures on paper but does not actually take the custody of goods. In such case consider the following example.
Eg: Mr Raviraj of Badlapur Maharashtra has entered a contract with Mr Shah of Nashik Maharashtra to purchase goods. However, Mr Raviraj has directed Mr Shah to send the goods directly to Mr Swamy of Bangalore. In this case considering the provisions of Section 10(1)(b), the goods are delivered by the Supplier Mr Shah to the recipient Mr Swamy at the direction of third person Mr Raviraj. In such case Mr Raviraj has only procured goods on the basis ie by way of constructive delivery but not by way of physical delivery. However, for the purpose of this section it would be deemed that Mr Raviraj has received the delivery of goods and the place of supply for the purpose of this transaction would be that of Mr Raviraj. Even when the goods would be delivered by Mr Shah of Nashik Maharashtra to Mr Swamy in Bangalore Karnataka, it would be deemed that the place of supply would be the registered premises of Mr Raviraj ie Badlapur Maharashtra. Therefore, for the transaction of Purchase of goods by Mr Raviraj from Mr Shah, the place of supply would be Badlapur Maharashtra. The Location of supplier also happens to be in Maharashtra, therefore the taxes to be levied would be CGST+SGST of Maharashtra. Also in addition to this the second transaction in this case would be where the goods are sold by Mr Raviraj to Mr Swamy. Although the goods were not dispatched by Mr Raviraj to Mr Swamy, for the purpose of this act it shall be deemed that the sale of goods to Mr Swamy has been made by Mr Raviraj. Thus Mr Raviraj would also be required to issue an invoice. For the purpose of this second transaction, the “Location of supplier” would be registered premises of Mr Raviraj Maharashtra and the “Place of supply” would be registered premises of Mr Swamy Bangalore ie Karnataka, thus Mr Raviraj would levy IGST in the given case.
Another case, if lets say in the above example, Mr Swamy was a job-worker of goods for Mr Raviraj, then there would have been only one single transaction of “Bill to Ship to” and in such case the supplier would be charging CGST+SGST as described in first case above. Also there would be no need of any second transaction taking place.
(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;
Eg: Mr Pavan has rented furniture in his office from a furniture store Furneco Ltd. However Mr Pavan offers to buy the same instead of paying rent after using it for 5 months. In such case, Funeco Ltd agrees to sell the same to him. Here we can observe that at the time of “Supply by way of sale of furniture”, there would be no movement of goods involved. In such case the place of supply would be the location of goods at the time of delivery (ie registered premises of Mr Pavan). Thus the “Location of supplier would be the registered premises of Furneco Ltd and the place of supply would be registered premises of Mr Pavan. Accordingly the taxes (CGST+SGST / IGST) would be levied.
(d) where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;
Eg: MOTIS elevators, an entity holding its registered premises in Delhi has entered a contact with Airports Authority of India (Delhi), to install Elevators at 5 Airports across India. The installations would be done at Delhi, Agra (UP), Indore (MP), Bhopal (MP) and Pune (MH). In the given case the contract has been entered by MOTIS elevators with Delhi head office of Airports Authority of India. However, the installation of the elevators would be done at 5 respective places. Therefore, according to provisions of section 10(1)(d), it can be said that for all 5 installations the place of supply would be the 5 locations mentioned above. Although the contract has been entered with head office, for the purpose of GST the Invoicing would be required to be done considering 5 different Place of supplies. IGST would be levied in cases other than Delhi and CGST+SGST would be levied in case of Delhi.
(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.
Eg: Q Ltd of Mumbai is engaged in manufacture of napkins. It has supplied a consignment of Napkins to Indian Railways for the on-board journey of Rajdhani Express plying from Mumbai to Delhi and en-route GJ, MP, RJ states. As the napkins may be consumed in either of states by the passengers, the determination of place of supply was necessary. In the given case, factually the consumption of the goods onboard may take place in any state, however there cannot be a certain record keeping done on a real time basis and it would be cumbersome to determine taxability. Therefore, in such case the principle has been laid down clearly. In case of supplies on-board a conveyance, the place of supply would always be the place or the location at which the goods are taken on board. Therefore, in the given case the place of supply would be Mumbai and Q Ltd would be required to levy CGST+SGST.
(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.
Rules have been laid down in cases where under either of the above cases, the Place of supply cannot be determined.
- Determination of Place of Supply of Goods (In case of Imports and Exports)
11. The place of supply of goods,
(a) imported into India shall be the location of the importer.
The provisions of Section 11(1)(a), makes it amply clear that in case of import of goods the place of supply would always be the “Location of Importer” ie the place where the importer holds his registered premises.
Thus, it may be possible that the goods have been unloaded at Mumbai Port Maharashtra, but the registered premises of importer is not in Maharashtra but is in Umergaon in Gujarat state, in such case the Place of Supply would be Umergaon in Gujarat and the IGST liability would be paid considering the “Place of Supply” to be Gujarat.
(b) exported from India shall be the location outside India.
Exports means, an activity of taking goods outside India from India. Thus, in such case the Place of supply in all cases of exports shall be outside India. Since the place of supply would be outside India, in such cases, GST would not be applicable.
In this part we have analyzed the provisions of place of supply of goods. In the next issue, we would be discussing practical cases of place of supply of services.