Place of Supply of Goods under GST

Goods and Services Tax or GST is not charged at the origin of goods or services. It depends on the destination or place of supply where the services or goods are consumed. Hence, it is destination based tax GST or destination-centric tax, and the state where the services/goods are consumed has the GST right to taxation. 

What is the place of supply under GST?

The place of supply is important in GST taxation since this also determines whether the transaction should be counted as an interstate or intrastate one and which tax among the 3 GST taxes- Central Goods and Services Tax (CGST), Integrated Goods and Services (IGST) and State Goods and Services Tax (SGST) should be collected. 

Difference between the ‘supply of goods’ and ‘place of supply under GST when goods are in movement’

Let’s quickly evaluate at the very beginning what is meant by the supply of goods and place of supply of goods when the movement of goods is involved.

Let's look at some examples to understand the GST place of supply rules and the taxation it attracts.

Intra state GST Example:

Take the example of Mr Mohan of ABC Enterprises in Mumbai, who supplies 20 laptops to Mr Bhaskar at Pune in Maharashtra. Since the origin and place of supply of goods are both in Maharashtra, the transaction attracts SGST in Mumbai.

Interstate purchase in GST Example:

Let’s take the same example with a destination change. Consider the transaction of Mr Mohan of ABC Enterprises in Mumbai, who supplies 20 laptops to Mr Bhaskar at Bangalore in Karnataka. In this case, it is an interstate supply, and hence, IGST is charged on the transaction.

Example of Delivery to third party under instructions:

Now use the example with a third-party intervention. Mr Vybhav of Mysore buys 20 laptops from Mr Mohan of ABC Enterprises in Mumbai and requests that they be delivered to Mr Bhaskar at Pune in Maharashtra. In this case, it is assumed the goods are returned to Mr Vybhav in Mysore of Karnataka State. Hence place of supply of goods under GST is Mysore, Karnataka GST, even though the origin and delivery place of the laptops is within Maharashtra State. Taxation, in this case, will be considered an interstate transaction and will be collected as per GST rules for Karnataka.

Example of Ex-factory delivery of goods by receiver:

Consider the place of supply in GST, with example, where Mr Vybhav from Mumbai, Maharashtra, gets an order for the supply of 150 laptops from Digitech Enterprises in Madurai, Tamil Nadu. Digitech mentions that it wishes to arrange for transportation to Madurai and take the goods from Mr Vybhav’s ex-factory in Mumbai. Here, the place of supply is Madurai in Tamil Nadu, even though the origin and delivery happen in Mumbai, Maharashtra. Hence IGST, as applicable, will be charged at the place of supply which is Madurai in Tamil Nadu.

Also Read: Types of GST in India - What is CGST, SGST and IGST?

E-commerce sale example:

Consider that Mr Mohan from Mumbai in Maharashtra orders a 54-inch smart TV from Digitech Enterprises and orders it to be delivered to his father Mr Ram in Bangalore, Karnataka as a present on his 30^th wedding anniversary. Quick Delivery, a registered delivery agent in Chennai, Tamil Nadu, is tasked with processing and delivering the TV to Mr Ram under a bill from Digitech Enterprises.

In this case, let's assume that Digitech Enterprises has delivered the goods to Mr Mohan from Mumbai in Maharashtra. Mr Ram in Bangalore, Karnataka, is the recipient who receives the TV as a present on his 30^th wedding anniversary and Quick Delivery, a registered delivery agent in Chennai, Tamil Nadu, is the delivery agent. The place of supply, in this case, will be Mumbai, Maharashtra and GST destination based tax will be collected as per the IGST laws.

What is the difference between the ‘supply of goods’ and ‘supply of goods when goods movement is not present’?

Now let's see how the place of supply is affected when there is no movement of goods.

Let's look at some examples to understand the place of supply and the taxation it attracts.

When no movement of goods is present:

Consider the example of Digitech Ltd, located in Chennai, Tamil Nadu, which opens a showroom in Bangalore, Karnataka. They buy the showroom with plug-and-play facilities from M/S Akai realtors of Bangalore, Karnataka. There is no movement of goods since the delivery of goods is at Bangalore in Karnataka. 

It is important to note that buying the building leads to paying GST and only rentals on commercial properties attract GST. Since the workstations with plug-and-play facilities are already on the property and are immovable property, the place of supply under GST will be Bangalore, Karnataka. Therefore, in Bangalore, GST is applicable with the taxation of both SGST and CGST.

Here’s a quick table to make the above place of supply in GST section concepts clear.

How will GST apply for goods delivered in the same state but billing address in another state?

Goods supplied on a vessel:

Now let’s consider when goods movement happens via a conveyance or vessel for the place of supply rules under GST.

Example of Goods when travelling on a vessel:

Considerthat Mr Raj travels from Mumbai to Bangalore by air and orders snacks, coffee and a watch while aboard. The airline is registered both in Bangalore and Mumbai. In this case, since the place of boarding is Mumbai, the goods are from Mumbai, and hence the place of supply is Mumbai GST, and both SGST and CGST are charged.

Note: When travelling by train or air, the place of supply will be where the food was boarded. Also, since airlines and train services typically have a pan-India presence, the movement of goods under GST is applicable, and both SGST and CGST are charged depending on the place of supply.

Consider another example of Mr Mohan of Amex Enterprises, Bangalore, travelling from Agra on the Delhi-Lucknow-Bangalore train. The lunch was boarded in Delhi, and he gets in at Agra and promptly orders a lunch. Since trains also have a pan India presence and the registration of the recipient or Amex Enterprises is Bangalore, the place of supply is where the food was boarded. In this case, it was boarded in Delhi. The place of supply is considered Delhi for Delhi GST, and both UTGST and CGST will be charged.

Note: If the place of supply is ambiguous, it shall be determined as per the recommendations of the GST Council and Parliament Rules.

Exports/Imports Place of Supply:

In this case, the place of supply of goods follows the rules given below:

• If goods are imported into India, the place of supply is considered to be the importer’s location.
• If goods are exported from India, the place of supply is taken as the importer’s location outside India.

Imports/ Exports example:

M/S ABC Enterprises, registered in Bangalore, Karnataka, imports 500 toys from China. The place of supply is Karnataka GST, and IGST is charged.

Consider that M/S Mysore Agarbathies registered in Karnataka export 1000 packets of incense sticks to Indonesia. The place of supply is the importer’s location outside India. The exporter location is considered the place of supply at Mysore, Karnataka GST, but GST is exempt or refundable if paid. 

Also Read: Types of GST Returns: Forms, Due Dates & Penalties

Conclusion:

GST compliance is mandatory and can get very confusing. Therefore, we hope that through this article, we have made the concepts of the place of supply in GST or GST destination based tax clear. For knowing more about GST, visit Khatabook. Apart from useful information regarding GST and business, it helps small business owners maintain their accounts and comply with GST mandates.