Under old laws, taxes were levied at different points. However, after the introduction of these multiple points of taxation are replaced by a single point of taxation. This point of taxation depends on the time and place of supply. We have already covered the topic of time/point of taxation.
In this article, we will discuss more the concept of Place of supply of goods. It is essential to determine the place of supply as this will determine which GST is to be imposed. If the location of supply crosses the state boundaries, then Integrated Goods and Service Tax will be imposed. However, if the supply is made within the state boundaries, then Central and State Goods and Service Tax will be levied.
There is a general rule that can be applied in the case of determination of Place of supply of goods. Goods and Service Tax is said to be a destination based tax; the i.e. tax benefit will be enjoyed by the authority of the Consumer state. Taxing authority of the final place of consumption will collect the taxes and not the state where the goods are produced. For example, if A is the producer state from where the goods are supplied to State B where they are finally consumed. State A will collect taxes, the ultimate enjoyment of tax will be done by State B which is the Consumer State.
When will IGST be imposed
If the goods are supplied from one state to another, in that case, Integrated Goods and Service Tax will be levied.
When will CGST and SGST be imposed
If the goods are supplied within one state i.e. the supplier and recipient of goods are situated within the boundaries of a single state, in that case, Central Goods and Service Tax and State Goods and Service Tax will be imposed. Both of these taxes are concurrent in nature, i.e. they are taxed together.
However, there are certain rules associated with the concept of a place of supply, and it is not determined just based on this general rule. Chapter V of Integrated Goods and Service Tax Act, 2017 contain the detailed provisions relating to the determination of supply of goods under GST.
Rules Relating to Determination of Place of Supply
- Rules relating to movement of goods
First, let us discuss the cases relating to movement of goods from one place to another. If the supply of goods involves movement either by the hand of supplier or recipient or by any other party, then the location of supply will be the location of goods at the time of termination of such movement.
If no movement is involved, then the place of supply will be the location of goods when they are supplied to the customer.
- When any third party is involved
The second situation is when any third party or intermediary participates in the supply of goods. If any third party instructs to deliver the goods to the recipient of any other person either before the start or during the movement of goods, then it is assumed that goods are received by such third person. And the principal place of business of such third party will be assumed as the place of supply of such goods.
- When Installation is part of supply
When the supply of goods includes installation or assembly of goods, then the location where such goods are assembled or installed will be considered as the place of supply.
- Supply on board a conveyance
If any goods are sullied (sold) on board a conveyance, then place of supply will be deemed to be the place where such goods were boarded on the conveyance. Such conveyance can include vessel, aircraft, train, motor vehicle, etc. For example, if we board a plane in Chennai and buy any item promoted by the plane crew, and dismount the plane at Delhi, then the place of supply will be at Chennai where goods were boarded at Chennai.
Place of Supply in case of Import/Export
We have covered all the situation where the supplier and recipient are located in India. Now, we are going to talk about the situations when either supplier or recipient is located outside India.
In the case of Exports: Location of a recipient will be outside India; thus the place of supply will be outside India. And as the place of supply is outside India, where Indian authorities have no jurisdiction they are Zero rated.
In the case of Imports: Place of supply in case of imports is the location of Importer. And they are taxable, as the importer is located in India.