It is vitally important to appreciate the time period ‘Place of Supply’ for deciding upon the right cost of the tax on ‘give’. The model GST legislation lays down the factors to assess the place of giving. Based on these standards, that you can deal with the supply of goods or services as either Intrastate (within the State) or Interstate (outside the State).
Place of supply rules for (Goods)
1) Where the supply involves a movement of goods, the place of supply shall be determined by the location of the goods at the time of final delivery.
For e.g.- A manufacturer in Kolkata, West Bengal, has an order from a consumer in Surat, Gujarat. The manufacturer directs his department in Mumbai, Maharashtra to ship the items to Surat. In this case, a place to provide will probably be Surat, Gujarat and as a result entails an interstate action of goods and will attract levy of IGST.
2) Where the supply involves a movement of goods, on the direction of a third party, whether as an agent or otherwise, the place of supply shall be the principle place of business of such third party, irrespective of the place of delivery of goods.
For e.g. – A supplier in Mumbai, Maharashtra sells products to a customer in Delhi. Delhi-based purchaser directs the Mumbai seller to ship the materials to Kolkata – Headquartered client. Although the situation of delivery is Kolkata, because Delhi-situated seller had directed such action, then the place of deliver might be the precept position of industry, i.e. Delhi and hence, charge IGST on such action.
3) Where the supply does not involve any movement of goods, then place of supply shall be the location of such goods at the time of final delivery.
For e.g. A Ltd has its registered office in Hyderabad, Telangana, opens a branch in Bengaluru, Karnataka, and purchases workstations from B Ltd. Whose office is in Bengaluru, Karnataka. Even though the same is, a supply of goods but there is no movement of goods. Since the movement is intra-state, it will attract CGST and SGST.
4) Where the supply includes installation of goods at site, then place of supply shall be the place of such installation.
For e.g. Installation of telephone towers or lift in an office building.
5) Where the goods are being supplied on board a vehicle, vessel, aircraft, or a train, i.e. on board a conveyance, then place of supply shall be the first location at which the goods are boarded.
For e.g. Howrah to New Delhi Rajdhani starts its journey from Howrah, West Bengal and passes through many states before ending its journey in New Delhi. The food served on board the train shall be considered as supply of goods. Thus, place of supply shall be Howrah since it is the first location of the goods.
6) Any other cases not covered above will be determined further as per recommendations from the GST council (yet to be finalised)
The above rules are defined for goods. The place of supply of services is separate and specific in nature. They go as follows.
Place of supply rules for (Services)
- For an immovable property: Where such immovable property is located or supposed to be located
- Where both service provider and recipient are required to be physically present: Location of the service provided
- In case of an event: The location where such event was held or amusement park is located
- Ancillary activities to the events: If the person is registered, then his location or if the person is unregistered, then the place where the event was held.
Note: Where the event is to be held across many States, then place of supply shall be treated as all the States in which such services are being provided on a proportionate basis as per the terms of the contract. Where no such contract exists, then on a reasonable basis or as may further be prescribed.
- Transportation of goods: If the recipient is registered, then his location and if unregistered, then the location of the goods from where they started for being delivered.
- Passenger Transportation: If the recipient is registered, then his location and if unregistered, then location from where the passenger embarks on his journey.
- Supply of services on board a conveyance, vehicle, vessel, train or aircraft: The first point of departure for that journey
- Telecommunication Services:-
- Fixed leased line, Internet leased line, cable or dish antenna: Place of installation
- Postpaid Mobile or Internet Connection: Billing Address of the recipient of service
- Prepaid Mobile or Internet Connection: Location where such pre-payment was made or vouchers are sold.
Note: When such a recharge is made through Internet Banking or E-Wallets, then the place of supply of service shall be the address of the recipient as on the record with the service provider.
- Banking or Financial Institutions to account holders: Location of the recipient of the services as per record of the provider.
- Banking or Financial Institutions to non-account holders: Location of the supplier of service.
- Insurance: If the person is registered, then his location or if the person is unregistered, then the location of the recipient as per records of the service provider.
- Restaurant, catering, personal grooming, beauty treatment, fitness and health services, cosmetic or plastic surgery: Location where the service is provided.
In all the above cases, where the location of the recipient cannot be identified, which is generally the fixed establishment or registered office of the recipient, then the usual place of residence of the recipient shall be treated as the location of receipt.
Understanding the Importance of Bill To-Ship To w.r.t. above provisions
When there are 3 parties involved in a transaction, then the place of supply plays a crucial part in determining which of the parties will pay tax. This is similar to point 2 above, where goods are moved from one place to the other on the direction of a third party, then the place of supply shall be the principal place of business of that third party.
Wherever the third party exists, accordingly, the inter-state and intra-state sale can be adjudged and taxed.