Place of Supply under GST and determination of nature of supply under GST

[VINOD CHAURASIA]

Place of Supply under GST and determination of nature of supply under GST

Introduction: This article discusses in detail about place of supply, its importance & place of supplier of services & recipient of service and determination of nature of supply under GST.

GST is Destination based taxation or consumption based taxation. By Destination based tax we mean that the revenue accrued to the place where the goods or services are consumed.

Therefore Place of Supply in GST is nothing but the place where the goods or services are consumed.

‘Place of Supply’ under GST is an important factor as it defines whether the transaction will be counted as intra-state(i.e within the same state) or inter-state(i.e. between two states) and accordingly the changeability of tax, i.e levy of SGST, CGST & IGST will be determined.

Due to the below reasons, the determination of correct place of supply under GST is of huge importance:

• Wrong classification of supply between interstate or intra-state and vice-versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 77 of CGST Act
• Where wrong taxes have been paid on the basis of the wrong classification, refund will have to be claimed by the taxpayer. However interest is not payable on such tax paid due to wrong classification of tax.
• Also, correct determination of place of supply will help us in knowing the incidence of tax. As if place of supply is determined as a place outside India, then tax will not have to be paid on that transaction.

Place of Supply is determined with the help of general or specific rule of place of supply.

The general rules determine the place of supply with respect to the location of the recipient of the goods or service.

 The specific rule determines the place of supply with respect to specific rules applicable to the specific situation.

For determining the nature of levy of taxes based on Place of Supply, two things are to be considered namely:

• Location of Supplier: It is the registered place of business of the supplier
• Place of Supply: It is the registered place of business of the recipient.

General provisions for determination of place of supply of goods such as:

• If the supplier as well as the recipient are located in same state, then it will be counted as ‘Intra-State Supply of Goods’ and hence SGST & CGST will be levied.
• If the supplier and the recipient are located in different states, then it will be counted as ‘Inter-State Supply of Goods’ and hence IGST will be levied.

Specific provisions for determination of place of supply of goods such as:

• The place of supply of goods: where the supply involves movement of goods
• The place of supply of goods: where the supply involves no movement of goods
• The place of supply of goods: in case of export & import of goods.

These points are discussed below in the article.

The transactions in terms of supply of services can be broadly categorized as below:

1. Domestic Transactions

These are the transactions where both the parties i.e the supplier as well as recipient of service are in India. Domestic transactions can be further categorized as below:

• Inter-State (i.e between two different states)
• Intra-State (i.e within the same state)

General Rule

In general, the place of supply for services will be the location of the service recipient (the recipient needs to be a registered person). In cases, where service is provided to an unregistered person, the place of supply will be the:

• Location of the service recipient (if the address is available on record);
• Otherwise, location of service provider

The special cases under this classification are discussed below in this article.

2. International Transactions

These are the transactions where either of the service recipient or the provider is outside India. Transactions in which both the recipient as well as provider are outside India are not covered here.

General Rule

The Place of Supply for services treated as international transactions shall be:

• The location of service recipient
• In case where the location of service recipient is not available, the place of supply shall be location of the supplier.

The special cases under this classification are discussed below in this article.

Location of the recipient of services as per section 2(14) of IGST Act:

S.No	Case	Location of Recipient of Service
	Where a supply is received at a place of business for which the registration has been obtained	such place of business
	Where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere)	such fixed establishment
	Where a supply is received at more than one establishment, whether the place of business or fixed establishment	the location of the establishment most directly concerned with the receipt of the supply
	in absence of such places	the location of the usual place of residence of the recipient;

Location of the supplier of services as per section 2(15) of IGST Act:

S.No	Case	Location of Supplier of Services
	Where a supply is made from a place of business for which the registration has been obtained	the location of such place of business
	Where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere)	the location of such fixed establishment;
	Where a supply is made from more than one establishment, whether the place of business or fixed establishment,	the location of the establishment most directly concerned with the provision of the supply
	in absence of such places,	the location of the usual place of residence of the supplier;

 Specific Rules of Supply

Section 10: Place of supply of Goods other than goods imported into, or exported from India

Section of IGST Act	Situation	Place of Supply
10(1)(a)	Supply Involves Movement of Goods	Location of the goods at the time of at which the movement of goods terminates for delivery to the recipient. This is irrespective of the fact that whether the transport is arranged by the buyer or seller.
	Example: B comes to Rajasthan and purchase some goods from A and told to send the goods to Delhi, A takes the bilty in his own name and send the goods to B in Delhi. In the given case, POS would be Delhi, as effective control of the goods to B is handed in Delhi.
10(1)(b)	Goods are delivered by the supplier to a recipient or any other person, on the direction of a third person by way of by way of documents of title to the goods or otherwise	It shall be deemed that the said third person has received the goods and the POS of such goods shall be the principal place of business of such person.
	Example: A in Rajasthan supplies goods to B in Delhi. B in Delhi asks A to send the goods to C in Maharashtra. Therefore, as the goods have been send to C in Maharashtra by A on the direction of B, the POS would be Delhi.
10(1)(c)	Supply does not involve movement of goods	Location of such goods at the time of the delivery to the recipient.
	Example: A and B both located in Rajasthan. B comes to shop of A. A delivers goods to B. POS would be Rajasthan.
10(1)(d)	Goods are assembled or installed at Site	Place of supply shall be the place of such installation or assembly.
10(1)(e)	Goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle	Location at which such goods are taken on board

Section 11: Place of supply of Goods imported into, or exported from India

Section of IGST Act	Situation	Place of Supply
11(a)	Goods imported into India	Location of the importer
11(b)	Goods exported from India	Location outside India

Section 12: Place of supply of services where location of both, the supplier and the recipient is in India:

• General Rule Section 12(2)
• Specific Rule Section 12(3) to 12(14)

General Rule - Section 12(2) of IGST Act, 2017:-

If the recipient is a registered person then the place of supply would be:

• the location of recipient of service.

If recipient is not a registered person and address of recipient exists on record then POS would be:

• the location of the recipient.

If the address of recipient does not exists on record, then the place of supply of service would be:

• the location of the supplier of service.

Example: A located in Gujarat receives services at Gujarat from B Located in Rajasthan. A is a registered person under Gujarat GST. In this case POS will be Gujarat.

Specific Rules - Section 12(3) to (14) of IGST Act, 2017:-

Section of IGST Act	Situation	Place of Supply
12(3)	Place of supply directly in relation to an immovable property directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a housing boat or any other vessel; or by way of accommodation in any immovable property for organizing any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or any services ancillary to the services referred to above	Location at which the immovable property or boat or vessel is located or intended to be located,      and if located outside India, location of service recipient
	Example: (1) A in Delhi wants to construct a building at Mumbai. He hires an engineer based at Kolkata. POS in this case would be Mumbai as immovable property is intended to be located in Mumbai. Example: (2) Geeta is registered in Mumbai. She goes to Kolkata and stays in a hotel at Kolkata. Where she was also charged for use facility of Beauty treatment at hotel. POS would be Kolkata for accommodation service by hotel and Beauty treatment as it is an ancillary service to the accommodation
12(4)	Restaurant and catering services, personal grooming, fitness, beauty treatment, health service	Where the services are actually performed
12(5)	Services in relation to training and performance appraisal	If recipient is registered than location of such person,    Otherwise Location where the service actually performed.
	Example: A located at Gurgaon provides training at Bhopal to employees of B Ltd, which is registered at Mumbai. POS will be Mumbai.  If B Ltd is not a registered than POS will be Bhopal.
12(6)	Services provided by way of admission to a cultural artistic, sporting, scientific, educational, or entertainment event or amusement park or ancillary service	Where the event is actually held or where the park or such other place is located.
12(7)	Service provided by way of- Organisation of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of service in relation to a conference fair, exhibition, celebration or similar or events, or Services ancillary to organization of any of the above events or services, or assigning of sponsorship of any of the above events.	If recipient is registered than location of such person, Location where the event is actually held.  If the event is held outside India, the place of supply shall be the location of the recipient.
	Example: 1 M organizing a cultural event at Mumbai. He is registered in Kolkata. D is a registered person in Delhi, provides his services at Mumbai. POS would be Kolkata. However if M is not registered than POS would be Mumbai.  Example: 2 X, who is resident in Delhi hires ‘Y’ who is resident of Bhopal to provide services for organizing an event at USA. POS would be Delhi.
12(8)	Services by way of transportation of goods, including by mail or courier	If recipient is registered than location of such person, otherwise Location at which such goods are handed over for their transportation
	Example: J is registered person in Jaipur. He sends some goods from transportation from Kolkata to Mumbai. POS would be Jaipur. However if J is not registered person than POS would be Kolkata.
12(9)	Passenger transportation service	If recipient is registered than location of such person, otherwise The place where the passenger embarks on the conveyance for a continuous journey. If the point of embarkation is not known at the time of issue of right to passage, then provisions of section 12(2) shall apply. Return Journey shall be treated as a separate journey.
	In the below examples recipient is unregistered Example:1      Journey from Mumbai-Delhi-London-Delhi: POS shall be Mumbai Example:2      Journey from London-Mumbai-London: POS shall be London Example:3      A books two tickets. 1st is Mumbai-Delhi and 2nd is Delhi- Mumbai for Return. In this case for 1st case POS is Mumbai and for 2nd Delhi.
12(10)	Services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle	Location of the first scheduled point of departure of that conveyance for the journey
12(11)(a)	Telecommunication services including data transfer, broadcasting cable and direct to home television services	Where the fixed telecommunication line is installed for receipt of service
	Example: X Limited registered at Bangalore provides a dish antenna at house of A in Delhi. POS would be Delhi
12(11)(b)	Mobile connection for telecommunication and internet services provided on post- paid basis	Location of Billing address of the recipient of service of on the record of the supplier of services
12(11)(c)	Mobile connection for telecommunication and internet services provided on pre payment through a voucher	The address of selling agent or reseller or distributor as per the records of the supplier, or Location where such pre payment is received or vouchers are sold by any person to the final subscriber
12(11)(d)	In any other case	The address of the recipient as per the as per the records of the supplier, Otherwise The location of supplier
Proviso to section 12(11)	Mobile connection for telecommunication and internet services provided on pre payment through electronic mode or internet Banking	Location of the recipient of service on record of the supplier of service
12(12)	Banking and other Financial services including stock broking Services	Location of the recipient of services on the records of the supplier of services.  Otherwise the location of the supplier of services.
	Example: A in Mumbai has a bank account with SBI. The address on record available with bank is in Delhi. POS is Delhi
12(13)	Insurance Services	If recipient is registered than location of such person, otherwise location of the recipient of services on the records of the supplier of services.
	Example: X is person located at Delhi and taken an insurance policy from a company based in Kolkatta. If A is registered then POS would be Delhi. Otherwise location of the recipient of services on the records of the supplier of services
12(14)	Advertisement services to Central Government, a state government, a statutory body or a local authority	Located in each of such states and the value of such supplies specific to each state shall be in proportion to amount attributable to service provided by way of dissemination in the respective states
	Example: X Ltd, located and registered in Delhi has been appointed as an Advertisement Agency by Government of Haryana for Advertisement of Make in India in the entire state of Haryana. POS would be Haryana.

Section 13: Place of supply of services where the location of the supplier or the location of the recipient is outside India

General Rule Section 13(2)

Wherein either location of the supplier or location of recipient of service is outside India, the place of supply would be:

a. The location of recipient of services  or

b. The location of supplier of services if location of recipient is not available in ordinary course of business.

Specific Rules as per section 13(3) to 13(13) are as below:

Section of IGST Act	Situation	Place of Supply
13(3)(a)	Services supplied in respect of goods that are required to be made physically available by the recipient of service to the supplier of service, or to a person acting on behalf of the supplier of service in order to provide the service.	Location where the services actually performed
	Note: The basic requirements of a service to be covered under this rule is that the goods temporarily come into the physical possession or control of the service provider and without this happening, the service cannot be rendered. Thus the service involves movable objects or things than can be touched, felt or possessed. Example: X sends the goods to Y for repairing of the said goods. The goods are again handed over to X by Y after repairing. The POS would be where the services are performed by Y.
Ist Proviso to 13(3)(a)	This clause shall not apply in the case of a service supplied in respect of goods that are temporarily imported into India for repair and exported after repairs without being put to any use in India, other than that which is required for such repair
IInd Proviso  to 13(3)(a)	When such services are provided from a remote location by way of electronic means.	Location where goods are situated at the time of supply of service.
13(3)(b)	Services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.	Location where the services actually performed
13(4)	Services supplied in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or coordination of construction work, including architects or interior decorators	Place where the immovable property is located or intended to be located.
13(5)	Services supplied by way of admission to, or organization of, a cultural, artistic, sporting, scientific, education, or entertainment event, or a celebration, conference, fair, exhibition, or similar event, and of services ancillary to such admission or organization	POS shall be the place where the event is actually held.
	Example: X comes from UK and attends a conference at Delhi. POS would be Delhi.
13(6)	Where services referred in above 13(3), 13(4), 13(5) is supplied at more than one location, including a location in the taxable territory	Location in the taxable territory
13(7)	Where services referred in above 13(3), 13(4), 13(5) is supplied at more than one state	POS of such services shall be taken as being in each of the states in proportion to the value of services so provided in each state
13(8)	(a) services supplied by a banking company, or a financial institution, or a nonbanking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.	POS shall be the location of the supplier of services
	Example: X located in India, gives intermediary service to Y located in UK. POS would be location of supplier of service i.e. X, India.
	Section 2(13) of the Act defines the term ‘intermediary’ as a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
13(9)	Services of transportation of goods, other than by way of mail or courier	POS would be destination of the goods
	Example: X send some goods through transporter from India to UK. POS would be UK
13(10)	Passenger transportation service	Where the passenger embarks on the conveyance for a continuous journey
	Example: X resident of UK, goes to UK from India. He embarks from India. POS would be India.
	Section 2(3) of the Act defines the expression ‘continuous journey’ as a journey for which a single or more than one ticket or invoice is issued at the same time, either by a single supplier of service or through an agent acting on behalf of more than one supplier of service, and which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued.  The term’ stopover’ means a place where a passenger can disembark either to transfer to another conveyance or break this journey for a certain period in order to resume it at a later point of time.
13(11)	Service provided on board a conveyance during the course of a passenger transport operation, intended to be consumed while on board	First scheduled point of departure of that conveyance for the journey
13(12)	Online information and database access or retrieval services	Location of recipient of Service
	The person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non contradictory conditions are satisfied - the location of address presented by the recipient of services through internet is in the taxable territory; the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory; the billing address of the recipient of services is in the taxable territory; the internet protocol address of the device used by the recipient of services is in the taxable territory; the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory; the country code of the subscriber identity module card used by the recipient of services is of taxable territory; the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

The author is a practising CA and is registered Insolvency Professional. He can be reached at [email protected] , Mob. +91 9953587496.

Discussions to this article

[KASTURI SETHI]

Peerless indeed.

[Raman Singla]

Seller and consignee belongs to state A.

Buyer belongs to state B, all are registered under GST

Buyer directs the seller to transfer of goods to consignee in state A.

What will be billing method of Seller to buyer???

And how it will be done in e way bill as bilty is with seller, to get token from consignee...