GST Model Law: Determination of place of supply of Goods and services
All of us are now getting the basic idea about GST. There will be two types of taxes first a set of CGST +SGST and other is IGST. Each transaction will be classified in either intra state or interstate supply of Goods or services. Your output tax liability is CGST+SGST or IGST will totally depend on the nature of transaction.
Why is this important to have the correct classification of every transaction as intra state supply of Goods or services or interstate supply of Goods or services at the time of payment of GST?
Because when you will realise that you have paid the incorrect taxes (like CGST and SGST in place of IGST or vice versa) you won’t be able to set off them but you will have to pay the correct taxes additionally. Although you can claim the refund of taxes wrongly paid but as you have charged it from customer and it was not a burden on your pocket directly ( GST being an indirect is always recovered from others) principle of unjust enrichment will be there and technically you are not eligible for any refund.
Importance: Now you can understand the importance of correct classification of every supply of Goods or services as intra state or interstate.
Basic rule to determine the nature of any transaction is 1) If the Location of supplier and place of supply are in same state it will be an intra state transaction.
2) ) If the Location of supplier and place of supply are in different state it will be an inter state transaction.
Now next step us How to determine the Location of supplier?
Location of supplier is defined under CGST/SGST Act as per the definition location of supplier is:
- Registered place under GST from where he made supply
- Location of fixed establishment from where supply is made.(Even if it is not registered but have infrastructure and human resource to make supply.
- In case supply is made from multiple places, the location of supplier is the place which is most directly concerned with provision of the supply
- In the absence of any such place, the location is the usual place of residence of the supplier
Now let us move to the next step now we need to determine the place of supply
Place of supply will have different meaning in case of supply of Goods and supply of services.
Section 5 of Model IGST Act explains the provisions to determine the place of supply for Goods in various situations:
- Where the supply involves the movement of Goods (Sec 5(2) of IGST Act: In some of the transactions delivery is not possible without the movement of Goods. In those cases Place of supply will be the place where the movement of Goods ends. E.g. In case of supply of ready mix movement is necessary to complete supply because we can’t carry it in any vehicle; there is a special vehicle available with supplier. We can’t use it unless it is provided at the construction site. In this case place of supply will be the construction site where the Goods are finally delivered after movement.
- When Goods are delivered to a third person (Sec 5(2A): In case the goods are delivered to the person who is not the buyer on direction of Buyer. In this case the place of delivery of Goods will be determined by a fiction. The place of supply of Goods in this case will be the registered place of buyer of the Goods.
- When supply doesn’t need movement of Goods (Sec 5(3): In the supplies where movement of Goods is not required the location of Goods at the time of supply will be the place of supply for the Goods. e.g When we buy a headphone or mobile from a shop there is no need of movement of Goods to make delivery. In these cases the place of supply will be the location of Goods; in this case it will be the shop or showroom.
- When the Goods are installed or assembled at a site: In some supplies goods are required to be installed or assembled at the site of buyer. In this case the place of such installation/Assembling will be the place of supply.
These were the basic provisions covering the place of supply of Goods under the GST regime. The basis principal followed in all of above rule is that the place where the actual delivery take place is assumed to be the place of supply except the subsection 2A where the Place of supply is decided by a fiction.
Now in the second part we will go through the principals for determination of place of supply of Services covered by section 6 of IGST Act.
Subsection 2 and 3 to section 6 covers the general rules for determination of place of supply of services. If it is a supply of service by a registered person to a registered person then location of recipient will be the place of supply.
If it a supply of service by a registered person to a person not registered under GST then place of supply of services will be
- Location of recipient when the address on record exist
- If such address is not available then location of supplier.
Above rules won’t apply to the services mentioned under subsection 4 to 15 as they are specific provisions.
| Simplified chart for Place of Supply for Services under GST | |||
| Sec(IGST) | Services provided by | Services provided to | Place of supply |
| General rules under section 6(2) and 6(3) | |||
| 6(2) | A registered person | A registered person | Location of recipient |
| 6(3) | A registered person | Other than a registered person | a) Location of recipient when address on records is available b) If such address is not available , Location of supplier |
| Specific rules covered under section 6(4) to 6(15) | |||
| 6(4) to 6(15) | Service | PoS when supplied to a registered person | Pos when supplied to other than a registered person |
| 6(4) (a) | In relation to an immovable property | Location where that immovable property is located | Location where that immovable property is located |
| (b) | By way of lodging accommodation by a hotel, inn, guest house, home stay club by whatever name called including a house boat, Vessel. | Location of that Property, house boat or vessel | Location of that Property, house boat or vessel |
| (c) | By way of accommodation in any immovable property for organizing any function.(like marriage reception, social or religious function) | Location of that Property | Location of that Property |
| (d) | Any service ancillary to above | Location of that Property | Location of that Property |
| 6(5) | Restaurant, Catering services, health club, personal grooming, fitness including plastic or cosmetic surgery. | Location where services are performed | Location where services are performed |
| 6(6) | Training and performance appraisal | Location of such person | Location where the services are performed |
| 6(7) | Admission to a cultural ,artistic, sporting, scientific educational or entertainment event and ancillary services | Place where the event held or park is located | Place where the event held or park is located |
| 6(8) | a) Organizing a cultural, artistic, sporting , scientific education or entertainment event including supply of services in relation to a conference ,fair exhibition celebration or similar services b) Ancillary services to above | Location of such person | Place where the even actually held |
| 6(9) | Services by way of transportation of Goods by mail or courier | Location of such person | Location where such Goods are handed over for their transportation |
| 6(10) | Passenger transportation services | Location of such person | Place where the passenger embarks on the conveyance for a continuous journey. |
| 6(11) | Service on Board a conveyance | Location of first scheduled point of departure of that conveyance for the journey | Location of first scheduled point of departure of that conveyance for the journey |
| 6(12)(a) | Telecommunication line | Location where such lines are installed | Location where such lines are installed |
| 6(12)(b) | Mobile/internet services-Post paid | Location of billing address | Location of billing address |
| 6(12)(c) | Mobile/internet services-Pre paid | Place where payment received and such voucher is sold | Place where payment received and such voucher is sold |
| If recharged online | Location of recipient in records of supplier | Location of recipient in records of supplier | |
| 6(13) | Baking, financial services including stock broking | Location of recipient in records of supplier | Location of recipient in records of supplier |
| If not linked to any account | Location of the supplier of services | Location of the supplier of services | |
| 6(14) | Insurance services | Location of such person | Location of recipient in records of supplier |
| 6(15) | Advertisement services to the Central Government , State Government, a statutory body or a local authority | Amount attributable to each state | Amount attributable to each state |
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CA Shafaly Girdharwal
CA
New Delhi, India
CA Shaifaly Girdharwal is a GST consultant, Author, Trainer and a famous You tuber. She has taken many seminars on various topics of GST. She is Partner at Ashu Dalmia & Associates and heading the Indirect Tax department. She has authored a book on GST published by Taxmann.
