written by Khatabook | September 23, 2021

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.

Supply of goods or services 

Place of supply in GST of goods or services

This term supply of goods or services refers to the moving of goods or services by the buyer, supplier, or other people.

The place of supply is the goods or services location when the goods movement ends with the recipient receiving the goods/services.

Under this term, the supply of goods is when goods or services are delivered to the buyer from the seller. It involves a third party like an agent during or before the goods movement and is typically accompanied by a title transfer.

It is assumed that the third person has received the goods, and therefore, the GST place of supply of the goods will be the principal place of business of the third party.

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 30th 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 30th 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.

Supply type of goods

Place of supply of goods

In this type of supply of goods, there is no movement of goods under GST by the recipient or supplier.

The place of supply is taken to be the location of the goods in the hands of the recipient at the time of delivery or transfer of ownership.

Goods are installed and assembled at the site only.

In this case, the place of supply of goods is the location or place of assembly or installation.

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?

Supply type

Supplier Location

Recipient Registered Office location

Site location for installation or assembly 

Place of supply

GST

 

 

 

 

 

 

Goods are installed or assembled at the site

Orissa

Bangalore

Hyderabad

Hyderabad GST

CGST SGST

 (Hyderabad)

Mumbai

Mumbai

Mumbai

Mumbai GST

CGST SGST

 (Mumbai)

Jharkhand

Jharkhand

Maharashtra

Maharashtra

CGST SGST

 (Maharashtra)

Tamil Nadu

Tamil Nadu

Karnataka

Karnataka

CGST SGST

 (Karnataka)

Tamil Nadu

Karnataka

Maharashtra

Maharashtra

CGST SGST

 (Maharashtra)

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.

Supply type of goods 

Place of supply

Goods are on board a conveyance or vessel or train or aircraft or a motor vehicle.

Location at which such goods are taken on board.

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.

Supply type of goods

Place of Supply

GST taxation

Goods imported into India

Importer’s location 

IGST is always charged on imports

Exported from India

The importer’s location outside India

GST on exports is refundable.

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.

FAQs

1. Why is GST called a destination tax?

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 a destination-centric tax, and the state where the goods or services are consumed has the right to claim GST.

2. What happens to GST tax if I am a small exporter?

Export of goods or services are considered under zero-rated supply, therefore GST will not be required to be paid by a small exporter. 

3. Am I liable to pay GST if I import car parts from China, and am GST registered in Delhi?

Yes, the place of supply of goods, in this case, will be the importer’s location, and you are liable to pay UTGST and CGST as the place of supply is Delhi, Delhi UTGST.

4. I am a frequent traveller by air from Bangalore, and my company in Bangalore bears my expenses. What GST is to be paid for the food served aboard the plane?

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, both SGST and CGST are charged depending on the place of supply. In your case, the place of supply will be Bangalore, Karnataka GST, assuming you board at Bangalore and the food is also boarded at Bangalore. If your return flight is from Mumbai and the food is also boarded in Mumbai, the place of supply is Mumbai and Mumbai GST will apply. In both cases, SGST and CGST are collected.

5. I supply electric panels that are installed and assembled on site. I am registered in Bangalore, and my buyer is registered in Mumbai. However, the site location is in Ahmedabad, Gujarat. How is GST computed?

In this case, the site location is considered to be the place of supply. In your case, the place of supply is Ahmedabad, and Ahmedabad GST is applicable. Both CGST and SGST will apply. Ensure you are registered under GST in Ahmedabad or Gujarat. You can also register as a casual taxpayer for this order under Gujarat GST, wherein you get 90 days to complete your work. Just in case it is incomplete, you can request an extension showing due cause for another 90 days.

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