As we delve into the realm of taxation, the pivotal concept of Goods and Services Tax (GST) reveals itself as a destination-oriented levy / Tax. Within this framework, the notion of “Place of Supply” assumes paramount significance.
But what exactly do we mean by the “Place of Supply”?
Within the GST framework, the “Place of Supply” denotes the specific location where goods are handed over or services are furnished by the taxpayer. In simpler terms, it pertains to the registered domicile of the recipient of goods and/or services. This pivotal distinction leads us to the categorization of the Place of Supply under GST into two distinct spheres:
Firstly, we have the Place of Supply concerning goods,
Within the scope of this discussion, our focus lies on the Place of Supply in relation to goods within the ambit of GST. We will explore its conceptualization, and the governing rules, as well as illustrate the application through examples. Additionally, our discourse will encompass the Place of Supply pertaining to services under the GST framework.
Goods’ Delivery Location in GST’s Place of Supply
In the realm of GST, the allocation of the place of supply for goods is governed by Section 10 of the IGST Act, focusing on domestic transactions. Here, we delve into the guiding principles that aid in the determination of the place of supply for goods.
Mobilization or Movement of Goods
When goods traverse from one location to another, a distinct scenario unfolds. In instances where goods are transferred, the place of supply corresponds to the recipient’s destination where the goods are ultimately received. To illustrate, consider the case of Mr. X hailing from Delhi, who vends air conditioners to Mr. Y situated in Uttar Pradesh. Given the movement of goods from Delhi to Uttar Pradesh, the place of supply aligns with Uttar Pradesh. Additionally, this transaction incurs IGST, owing to its inter-state nature.
Non-Moving Goods
In certain scenarios, goods may remain stationary without undergoing any movement. In such instances, the determining factor for the place of supply is where the goods are handed over to the recipient. To illustrate this, consider the following example: Raam Laal, residing in Delhi, visits a mall in Gurugram to purchase a Lap Top. At the Digi-store within the mall, he avails of a discounted offer and buys a Lap Top.
Given that the goods remain stationary and don’t transition between locations, the applicable place of supply for the goods becomes Gurugram, situated in Haryana. Furthermore, within this type of transaction, both Central Goods and Services Tax (CGST), as well as State Goods and Services Tax (SGST), are levied, owing to its categorization as an intra-state supply.
Dispatch of Goods upon Third Party’s Request
In certain scenarios, a third party might initiate a request for a supplier to dispatch goods on their behalf to a designated recipient. Within this transaction, the supplier holds the choice of transferring either the title or ownership of the goods. Consequently, in such instances, the geographic location of the third party shall stand as the recognized point of goods dispatch.
To exemplify this notion, consider the following situation: Raam Laal maintains an official establishment in Delhi. He formally entreats Chandu Singh, situated in Uttar Pradesh, to transport a package to the residence of Laxmi Kanth in Mumbai. The goods, in this specific case, are conveyed by Chandu Singh to Laxmi Kanth, acting as a surrogate representative of the third party, Raam Laal. As a result, the location of supply for these goods becomes established as Delhi, where Raam Laal’s registered office finds its place. Furthermore, the application of Integrated Goods and Services Tax (IGST) becomes pertinent, given the inter-state nature of this transaction.
Placement of Goods at a Designated Site
Certain instances arise wherein goods are set up or assembled on-site. In such occurrences, the designated location of the goods’ installation or assembly determines the point of supply. To grasp this concept, consider the subsequent illustration: Raam Laal, positioned in Noida, places an order for a machine with Chandu Singh in New Delhi. Subsequently, Chandu Singh proceeds to install the machine at the office premises of Laxmi Kanth in Noida. In this scenario, the point of supply for the goods aligns with Noida. The application of IGST remains applicable due to the inter-state nature of this transaction.
Supply of Goods Using Conveyance
The most prevalent method of delivering goods involves their transportation through conveyances like ships, trains, airplanes, or motor vehicles. Within this context, the point of supply corresponds to the location where the goods are loaded onto the conveyance. This can be exemplified by considering the case of the Delhi-Allahabad Duranto Express, which provides meals to passengers during the journey from Delhi to Allahabad. The provisioning of food occurs at Aligarh in Uttar Pradesh. In this instance, the place of supply of the goods is Aligarh, Uttar Pradesh.
Imports and Exports of Goods
When it comes to the import of goods, the point of supply is tied to the location of the importer. Conversely, for the export of goods, the point of supply stretches beyond the borders of India. Let’s illustrate this through two examples:
Raam Ratan, a denizen of New Delhi, imports dates from the United Arab Emirates for his shop which is both situated and officially registered in the city. In this situation, the point of supply of goods aligns with New Delhi. Moreover, under such circumstances, IGST becomes applicable.
Amar Singh, operating from his registered office in Noida, Uttar Pradesh, exports spices to the United States. In this case, the point of supply of goods is rooted in Noida, Uttar Pradesh, leading to the applicability of the reverse charge mechanism. Furthermore, in this particular transaction type, GST enjoys an exemption.
However, specific scenarios may emerge where determining the precise point of supply for goods presents challenges. In such instances, the method for establishing the point of supply will be determined according to prescribed guidelines.