CA Pankaj Panchal

Importance of Place of Supply

Goods & Services Tax (GST) is a destination based consumption tax, mean tax should effectively where consumption of such supplies at destination thereof or as the case may at point of consumptions.

Place of supply is required to determine whether a supply is subject to SGST or IGST, according to Intra-state or  Inter-state transaction. Hence, Place of supply play a vital role in determining which state going to consume tax.

Consequences of Wrong Classification of Place of Supply

Accordingly to Section 74(1) and 74(2) of CGST Act, 2017, If a registered person who has paid CGST & SGST on a  transaction considering to be a intrastate, But later on held to be a inter-state transaction or vice-versa then amount of such tax shall be refunded subject to such manner & condition as may be prescribed.

Meaning thereby, registered person shall pay in cash such tax to appropriate govt and claim refund. It resultant into financial implication to the registered person.

So, Place of Supply of Goods or Services need to be determine before entering into transaction, so that tax should go to appropriate govt.

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