Kapil Joshi

Interstate or Intrastate Supplies? Immaterial for Supplies Covered by Reverse Charge Provisions under Goods and Service Tax (GST)

GST is a consumption / destination based tax wherein tax revenue should go to the state where goods/services have been consumed. In technical term such state is determined based on provisions of place of supply (POS) elaborated in Section 10, 11, 12 & 13 of the IGST Law. General rule for determining place of supply are:

For goods – location where the movement of goods terminate for delivery and

For services – location of the recipient.

Location of the supplier is another aspect which is evaluated to determine whether it’s an interstate supply or an intrastate supply. If location of the supplier and place of supply is in:

different state – it’s a interstate supply and

same state – it’s a intrastate supply

and accordingly IGST or CGST+SGST is paid respectively on such supplies (Section 7 and 8 of the IGST Law).

Section 9(3) of the CGST Law provides that Government will specify categories of supplies, tax on which shall be paid on reverse charge basis by the recipient (addressed as RCM supplies) and provisions of this act shall apply to such recipient as if he is the person liable for paying tax in relation to such supply.

Now with the above provisions in place the obvious question arises is whether one needs to at all look at the location of the supplier for cases where tax is payable under reverse charge as:

– taxes needs to be paid under reverse charge by the recipient as per section 9(3) by raising an invoice on himself.

– such recipient may not be registered in the state of supplier of service (in case of interstate supplies) thus it becomes practically impossible for the recipient to pay taxes in the other state.

– this tax revenue will, in all cases, go to the state in which recipient is located thus eliminating the need to categories this as interstate or intrastate supply.

Illustration:

ABC Ltd. of Maharashtra (not registered in Gujarat) takes transportation service from VAL Logistics, Gujarat for transportation of goods from Maharashtra factory of ABC Ltd. to customer located in Karnataka. Assuming transportation is notified as supplies covered under reverse charged under section 9(3) of the GST Law:

– ABC Ltd. will have to pay GST on such transportation service under RCM,

– ABC ltd. of Maharashtra will pay GST under RCM on such transportation supplies in the state of Maharashtra (not registered in Gujarat, thus no question of paying in Gujarat).

– GST revenue on such supplies viz. transportation service, will in all cases accrue to the state of Maharashtra as the service is done in Maharashtra (goods picked up from Maharashtra)

Looking at the provisions of the GST law and the practicality of the case it can be concluded that in case of supplies covered by RCM one is not required to categories the supplies in interstate or intrastate and pay taxes as if it’s a intrastate supplies.

Click here to know about RCM Under GST

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Category : Goods and Services Tax (6833)
Type : Articles (16958)
Tags : goods and services tax (5317) GST (4920)

6 responses to “Interstate or Intrastate Supplies under Reverse Charge Provisions in GST”

  1. Ca Pankaj Chugh says:

    Hi
    I am in respectful disagreement with the contention because of following:
    1. Although GSt is a destination based consumtion tax but there are place of supply (POS) rules which determine inter alia the tax to be charged by the supplier depending upon location of supplier and place of supply.
    2. in RCM the only difference as compared to forward charge is “Shift” of liability to pay tax only. All other things are same. so we have to follow POS rules.
    3. If we see the columns of GST returns there is columns of IGST also beseides the CGST/SGST.
    Thanks

  2. sourav agarwala says:

    Sir
    1) As per Section 5(3) of IGST Act 2017, Transportation service by GTA is covered under RCM
    2) Also Location of recepient & Loacation of supplier are located in two different states
    3) Also Place of supply is Loacation of recepient (Different State)

    Question : Why IGST is not paid under RCM ?

  3. Ninad says:

    Sir could you elaborate on why does first proviso to Section 5(1) of IGST Act, 2017 specifies that imports would be always subject to IGST?

  4. nice explanation kapil ji…

  5. gaurav says:

    Excellent analysis kapil

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