Place of Supply of Goods under GST

ALL ABOUT PLACE OF SUPPLY OF GOODS UNDER GST - ANALYSIS

In GST, the place of supply is a very important criterion for levy of GST i.e. whether CGST, SGST or IGST will be levied in a particular transaction or supply of goods depends on the place of supply. This is relevant both in the supply of goods and the supply of services.

We will discuss here only the place of supply of goods under GST.

​There are two types of transactions for which the place of supply of goods is relevant to determine the tax leviable.

(1) In the case of Imports and Exports

(2) In case of domestic transactions

​We will discuss each of them one by one.

​1. Place of Supply in case of cross-border transactions i.e. Imports and Exports

​(a) Place of Supply in case of Imports

​As per Section 11, the place of supply in the case of Imports is the location of the importer.

​E.g. Mr. Amit located in Jaipur, Rajasthan imported goods from the USA. In this case, the location of the importer is Rajasthan and hence the place of supply will be Rajasthan only. However in imports, IGST is leviable on all transactions but for the purpose of the revenue share of IGST, the portion of the tax will go to Rajasthan.

(b) Place of Supply in case of Exports

​In the case of Exports, the place of supply of goods will be the place located outside India. However, Exports are zero-rated under GST.

​2. Place of Supply in case of Domestic Transaction i.e. within India

​The place of supply in the case of the domestic transaction is all the more relevant as it will determine whether CGST/SGST or IGST is to be charged on the particular transaction.

These are further divided into five broad categories :

​(a) Where the supply involves movement of goods :

​In case the supply involves the movement of goods, the place of supply will be the location of the goods at the time when the movement of goods terminates for delivery to the recipient. Thus the location of the supplier or receiver is not relevant here to determine the place of supply of goods. The only relevant thing is at which place the movement of goods terminates for delivery to the recipient.

​(b) In case of Bill to Ship to Transactions

​There are instances when a particular supplier gets an order from the buyer but the buyer instead of taking delivery of goods asks the supplier to ship the goods to a third party. In these types of transactions, the place of supply will always be to the initial buyer i.e. the real buyer, and not the third person to whom the delivery of goods has been made.

These types of transactions are termed as bill-to-ship-to transactions wherein the billing is made to the initial buyer and the delivery or shipment is made to another person on the instructions of the buyer.

Let us understand the above concept with the help of an example :

​Mr. Ramesh, of Mumbai, received an order of 100 mobile phones from Mr. Suresh of Rajasthan. Mr. Suresh instructed Ramesh to deliver the goods to Mr. Mohan of Chennai.

​Here there are two transactions involved :

​1. Transaction between Mr. Ramesh and Mr. Suresh

The transaction between Ramesh and Suresh will be an Inter-state transaction as Mr. Ramesh is of Maharashtra and Mr. Suresh if of Rajasthan. Here Mr. Ramesh will make an invoice to Mr. Suresh and IGST will be charged on the same although the goods are delivered to Mr. Mohan of Chennai.

​2. Transaction between Mr. Suresh and Mr. Mohan

The Second transaction will be between Mr. Suresh of Rajasthan and Mr. Mohan of Chennai wherein Mr. Suresh will make an invoice to Mr. Mohan but the goods will be delivered to him directly by Mr. Ramesh.

Here Mr. Suresh will also charge IGST as the transaction is inter-state.

​(c) When there is no movement of Goods

​When there is no movement of goods either by the supplier or the receiver then the place of supply of goods will be the location of the goods at the time of delivery to the recipient.

Also when the goods are of such nature that the movement of goods is not possible then also the place of supply will be the location of the goods.

​E.g Mr. Animesh of Gujarat sold his pre-installed machinery which is installed at the factory in Madhya Pradesh to Mr. Rajneesh of Delhi. In this case, since the Machinery is non-movable and located at Madhya Pradesh, the place of supply will be at Madhya Pradesh and IGST will be charged by Animesh.

​(d) When goods are installed at the site

​As per Section (1)(d), when the goods are installed or assembled at a site, the place of supply will be the place of such installation or assembly.

​For example, Mr. Nitin of Maharashtra opens a new office in Banglore and orders Raj Enterprises of Delhi to install 25 computers at his new office. In this case, since the place of installation is Banglore and the location of the supplier is Delhi, it will be an IGST sale.

​(e) Goods on a Board a conveyance

​When the goods are supplied on board a conveyance including a vessel, aircraft, train, or bus, the place of supply will be the location at which such goods are taken on board.

​For Example, Mr. Sunil is traveling on a flight from Banglore to Delhi. Onboard, he asks for a water bottle and purchases the same. The water bottle was boarded in the flight from Banglore. In this case, the place of supply will be Banglore, and CGST and SGST will be charged in this case.

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