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Section 10 of IGST Act, 2017 – Place of Supply of Goods

“Place of Supply of goods” is the crucial and important factor in GST Regime since it divides the supply into two categories namely

a)    Inter-State Supply

b)    Intra-State Supply (Local Supply)

 

Subject to the provisions of section 10, supply of goods, where the “location of the supplier” and the “place of supply” are in

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

shall be treated as a supply of goods in the course of inter-State trade or commerce.

 

Therefore it is important to determine the “Place of Supply of Goods”

 

How to Determine Place of Supply of Goods (Section 10 of IGST, Act 2017)

 

10 (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––

 

 

Example 1) Supplier of Delhi receives an order from Buyer of Maharashtra and the goods are to be dispatched by supplier to the buyer in Maharashtra office.

 

Answer

Location of Supplier – Delhi

Place of Supply – Maharashtra (Since delivery terminates in Maharashtra)

Nature of Supply – Inter State Supply

Type of GST applicable - IGST

 

Example 2) Supplier of Delhi receives an order from Buyer of Maharashtra and the buyer decides to take delivery ex-factory of supplier i.e. from the factory of supplier in Delhi.  

 

Answer

Location of Supplier – Delhi

Place of Supply – Delhi (Since delivery for supplier terminates in Delhi)

Nature of Supply – Intra State Supply  (The same view has also been confirmed by CBEC through its FAQ Qus -64. Click here to view CBEC FAQ)

Type of GST applicable – CGST & SGST

Here arises the issue regarding the input credit of tax paid by buyer i.e. CGST & SGST in Delhi. As per FAQ published on CBEC portal, SGST & CGST of one state cannot be utilized for discharging the output tax liability of another state. Therefore Input SGST & CGST paid in Delhi cannot be utilised against Output SGST & CGST to be paid in Maharashtra.

Please note that although the Rate of "IGST" and "CGST + SGST" are same but charging wrong tax would create trouble for supplier. Because if supplier charges IGST on a transaction which was otherwise liable to CGST + SGST, then on being caught by tax authorities, he would have to pay CGST + SGST seperately and go for refund of IGST. So supplier has to decide the nature of supply carefully.

Considering the above issues in this B2B transaction, people should avoid these situations to happen.

 

Example 3) Supplier of Delhi receives an order from Buyer of Delhi and the goods are to be dispatched by supplier to the buyer in Delhi.

 

Answer

Location of Supplier – Delhi

Place of Supply – Delhi (Since delivery terminates in Delhi)

Nature of Supply – Intra State Supply

Type of GST applicable – CGST & SGST

 

(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

 

Example 1) Supplier of Delhi (A) receives an order from Buyer of Maharashtra (B) and buyer directs the supplier to deliver the goods to one of its customer located in Delhi (C).

 

Answer

Location of Supplier – Delhi

 

Place of Supply – Maharashtra (Although goods have been delivered to C in Delhi,  but supplier did the same on the direction of B, therefore it shall be deemed that B has received the goods and place of supply shall be the principal place of business of B i.e. Maharashtra)

 

Nature of Supply – Inter State Supply

 

Type of GST applicable - IGST

 

 

Example 2) Supplier of Delhi (A) receives an order from Buyer of Delhi (B) and buyer directs the supplier to deliver the goods to one of its customer located in Maharashtra (C).

 

Answer

Location of Supplier – Delhi

 

Place of Supply – Delhi (Although goods have been delivered to C in Maharashtra,  but supplier did the same on the direction of B, therefore it shall be deemed that B has received the goods and place of supply shall be the principal place of business of B i.e. Delhi)

 

Nature of Supply – Intra State Supply

 

Type of GST applicable – CGST & SGST

 

Now the issue arises as what would happen if, in the above examples, C is the branch of B instead of its customer? Whether this clause [clause b of Section 10(1) of IGST Act]  apply only in case of sale to customer or it applies even if C is the branch of B instead of its customer?

We believe that this provision should apply in case of branch as well, since all the branches located in different states are treated as distinct persons and are under compulsion to get separate GSTIN . (However the same is debatable) 

 

Example 3) Supplier of Delhi (A) receives an order from Buyer of Maharashtra (B) and the goods are to be dispatched by supplier to the buyer’s branch in Delhi (C).

 

Answer

Location of Supplier – Delhi

Place of Supply – Maharashtra (Although goods have been delivered to C in Delhi,  but supplier did the same on the direction of B, therefore it shall be deemed that B has received the goods and place of supply shall be the principal place of business of B i.e. Maharashtra)

Nature of Supply – Inter State Supply

Type of GST applicable – IGST

Now ideally B would raise an invoice on its branch C to transfer the credit of GST into the hands of C. And B would charge IGST on the same.

 

Example 4) Supplier of Delhi (A) receives an order from Buyer of Delhi (B) and the goods are to be dispatched by supplier to the buyer’s branch in Maharashtra (C).

 

Answer

Location of Supplier – Delhi

Place of Supply – Delhi (Although goods have been delivered to C in Maharashtra,  but supplier did the same on the direction of B, therefore it shall be deemed that B has received the goods and place of supply shall be the principal place of business of B i.e. Delhi)

Nature of Supply – Intra State Supply

Type of GST applicable – CGST & SGST

Now ideally B would raise an invoice on its branch C to transfer the credit of GST into the hands of C. And B would charge IGST on the same.

 

Example 5) Supplier of Delhi (A) receives an order from Buyer of Maharashtra (B) and supplier directs its Maharashtra branch (M) to deliver the goods to the buyer in Maharashtra.

 

Answer

Location of Supplier – Maharashtra (M)

Place of Supply – Maharashtra (Since delivery terminates in Maharashtra)

Nature of Supply – Intra State Supply

Type of GST applicable – CGST & SGST

Now ideally A would raise an invoice on its branch M to transfer the credit of GST into the hands of M. And A would charge IGST on the same.

 

(c) Where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;

 

Example 1) A Buyer of Delhi opens a new branch in Mumbai and they purchased few goods / assets pre-installed and lying at that new premises from supplier of Mumbai.

 

Answer

Location of Supplier – Maharashtra (Mumbai)

 

Place of Supply – Maharashtra (Since this supply does not require any movement of goods therefore place of supply shall be the location of such goods at the time of delivery i.e. Maharashtra)

 

Nature of Supply – Intra State Supply

 

Type of GST applicable – CGST & SGST

  

 

(d) where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;

 

Example 1) A Buyer of Delhi opens a new branch in Mumbai and they purchased a lift to be installed and fitted at Mumbai premises from a supplier of Mumbai.

 

Answer

Location of Supplier – Maharashtra (Mumbai)

 

Place of Supply – Maharashtra (Since the goods are assembled & installed at Mumbai location therefore place of supply shall be the location of such installation i.e. Maharashtra)

 

Nature of Supply – Intra State Supply

 

Type of GST applicable – CGST & SGST

 

 

Example 2) A Buyer of Delhi opens a new branch in Mumbai and they purchased a lift to be installed and fitted at Mumbai premises from a supplier of Delhi.

 

Answer

Location of Supplier – Delhi

 

Place of Supply – Maharashtra (Since the goods are assembled & installed at Mumbai location therefore place of supply shall be the location of such installation i.e. Maharashtra)

 

Nature of Supply – Inter State Supply

 

Type of GST applicable – IGST

 

 

(e) Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

 

Example 1) A train starts its journey from Delhi & ends in Maharashtra and in-between it passes through many states. The food served on board the train shall be considered as supply of goods. Thus, place of supply shall be Delhi being the first location of the goods.

 

 

Summary -

S.No.	Case	Place of supply of goods shall be
1	Where the supply involves movement of goods	The location of goods at the time when movement of goods terminates
2	Where goods are delivered to any person on the direction of a third person (whether acting as agent or otherwise)	The Principal place of business of said third person
3	Where the supply does not involve movement of goods	The Location of goods at the time of delivery
4	Where goods are assembled or installed at site	The place of such installation or assembly
5	Where goods are supplied on board (a vehicle, vessel, aircraft, train, motor vehicle)	The location at which such goods are taken on board

 

 

 

Very nice article. Imparts clarity on the subject matter by considering diverse situations and examples. Keep up the good work.

NICE ARTICLE. PLEASE SEND THE SAME IN CASE OF SERVICES TO BE PROVIDED WITH EXAMPLES.

precise and clear explanation

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