CA Shubham Khaitan
In order to determine whether a supply is interstate or intra state, both the location of the supplier and the place of supply are relevant. If the location of the supplier and the place of supply are in different states, then in that it will be considered as an Inter-state supply and IGST will be levied. If the location of the supplier and the place of supply are in the same state, then in that case it will be considered as an intra state supply and CGST and SGST will be levied.
In case of goods, the definition of the location of supplier and recipient are not given. As a result, this presents a challenging situation in cases of a number of supplies especially where billing is made from one place of business while the goods are dispatched from another place of business. There have been varied opinions among experts as to whether the location of supplier should be from the place where the billing is made or the place from where the goods are dispatched. Also, there are disputes with regard to the place of supply and movement of input tax credit in case of ‘bill to ship to’ transactions i.e. wherein the destination of goods and the place which accepts the invoice/ places the order are different. Clarity in the final law with regard to these kind of transactions will do a world of good for all the taxable persons at large.
It is to be noted here that if a mistake is committed by a taxable person with respect to determining whether a transaction is an inter-state or intra state supply, it can be really detrimental for the working capital of that person. For instance, if a person determines a supply to be an inter-state supply and pays IGST but later it is found that it should have been an intra state supply and ideally CGST/SGST should have been paid. In this kind of a scenario, the taxable person has to pay CGST/SGST first and then claim the refund of the IGST. So, the cash outflow of CGST/SGST would be immediate but the refund can only be obtained after a certain point in time. In fact with the history of the delay in providing refunds by the Department, this can only add to the woes of the person making such a mistake. So, determining the place of supply is of utmost importance in GST for any taxable person.
The place of supply of goods has been depicted below:
| Situations | Place of Supply |
| 1. Where supply involves movement of goods whether by the supplier or the recipient or any other person | Where the movement of goods terminate for delivery |
| Illustration 1: A distributor in West Bengal procures LED lights from a wholesaler in Gujarat on FOR basis. The terms of the contract requires the carrier to be arranged by the supplier and the supply will be complete only if the goods reach the destination safely. Here, the movement of goods is made by the supplier. So, the location where the movement terminates i.e. West Bengal will be the place of supply. Illustration 2: A wholesaler buys refrigerators directly from the factory of the manufacturer at Bihar on an ex-factory basis. The wholesaler obtains delivery of the same at the factory gate and declares the destination of goods as Madhya Pradesh. Thereafter, he takes the refrigerators to his godown for supply at Madhya Pradesh. This refers to the situation of movement of goods by the recipient. Hence, the place of supply will be the place where the movement of goods terminates for delivery to the recipient i.e the godown at Madhya Pradesh. | |
| 2. Where the goods are delivered on direction of a third agent whether as an agent or otherwise | Deemed that the third person has received the goods and the place of supply will be the principal place of business of the third person |
| Illustration 3: A wholesaler in Jharkhand asks a manufacturer in Maharashtra to directly deliver Paper reams to a retailer in Gujarat. Here, there will be two supplies that will be deemed to have taken place. First will be the supply between the manufacturer in Maharashtra and wholesaler in Jharkhand for which the place of supply will be Jharkhand as per Section 5(2A). The second will be the supply between the wholesaler in Jharkhand and the retailer in Gujarat for which the place of supply will be Gujarat as per Section 5(2). Illustration 4: An agent in Kolkata procures an order for plastic materials from a dealer in New Delhi for delivery to his principal at Mumbai. Since, the goods are delivered on direction of a third person (agent in Kolkata), the first supply will be the principal place of business of the agent i.e. Kolkata as per Section 5(2A). The second supply will be between the agent in Kolkata and the principal in Mumbai for which the place of supply will be Mumbai as per section Section 5(2). | |
| 3. Where supply does not involve movement of goods | The location of goods at the time of delivery to the recipient |
| Illustration 5: A customer from Orissa on a visit to New Delhi buys a perfume bottle from a shopping mall at New Delhi. The supplier of goods does not ask for the destination of goods nor the customer submit the same. No GSTIN was declared by the customer as well. Here, the person supplying the goods does not know the destination of goods. In fact , he doesn’t even know if any movement will occur outside the state or not. This will be covered in the case wherein supply does not involve movement of goods. So, the place of supply will be the location of goods at the time of delivery to the recipient i.e. New Delhi. | |
| 4. Where the goods are assembled or installed at site | The place of such installation or assembly |
| Illustration 6: A modular furniture manufacturer in Mumbai send its personnel to Kolkata for setting up a new office for a client whose registered office is Delhi. The furniture is brought in dismantled form to the office at Kolkata and assembled at the client’s place. Here, the place of supply will be Kolkata as it is the place of assembly/ installation. | |
| 5. Where the goods are taken on board a conveyance | The location at which the goods are taken on board |
| Illustration 7: Illustration 5.6: A flight from Guwahati to Mumbai goes via Kolkata. Some merchandise is served to passengers on a chargeable basis within the flight. The merchandise is taken on board at Kolkata and is served in between the journey from Kolkata to Mumbai. The place of supply will be Kolkata where the merchandise has been taken on board. | |
| 6. Where the Place cannot be determined by law from above | Determined by law made by the Parliament in accordance with the recommendation of the Council |
(Author can be reached atshubham@cakhaitan.com)
Author Bio
I would like to know more about supplying / exporting goods directly from other state where the supplier is in another state. For Eg. If Supplier is at Delhi, Manufacturer is at Gujrat… I would like to export goods manufactured directly from Gujarat to out of country. Please suggest if this can be done in GST scenario.
can this be shown in a matrix form whether IGST or CGST or SGST applies using different combinations.