Place of Supply – Section 10 (1) (a) IGST regarding movement of goods – Section reproduced as under:
“where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;’
Before analyzing the above provisions we should first know that a supplier is liable to pay correct type of tax i.e. IGST or CGST & SGST. The Supplier is liable to pay correct tax. If he paid tax incorrectly he may be penalized.
In the above said provisions the place of supply shall be location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
There is no problem if the movement of goods is being done by the Supplier himself. The Supplier shall send the goods at the place of the Recipient. If the Recipient is of other state, the Supplier shall charge IGST.
The question arises which tax should be charged by the Supplier either IGST or CGST & SGST if the goods delivered by the Supplier to the Recipient at his shop. The Recipient provided his GSTIN to the supplier which (GSTIN) pertains to other state. The Supplier did not know whether the Recipient consumed the goods in his (supplier) state Maharashtra or the Recipient took the goods in his (Recipient) state Gujarat. The Supplier only know that the Recipient is of other state but he (supplier) did not know where the movement of goods be terminated either in his state or in the state of Recipient. There is also no such liability upon the Supplier under the law to get check from the Recipient about termination point of goods as moved by the Recipient.
In FAQ dated 15-12-2018 issued by CBIC, example has been given in answer to question 6 in regard of place of supply “A person from Gujarat comes to Mumbai and purchases goods. He declared his Gujarat GSTIN, arranges transport himself and takes goods to Gujarat. The place of supply would be Gujarat in this case.”
From the above example we can understand that goods which involves movement, if the movement has been done by the Recipient, the Supplier shall presume that goods has been brought by the Recipient in his state according to provided GSTIN. The supplier shall charge IGST if the GSTIN pertains to other state.
In the above example it is presumed that the goods have been used by the Recipient in Mumbai in his works contract site. Thus goods were not brought to the state of Gujarat.
Two questions arise in the mind –
1. The Supplier did not know that the goods purchased by the Recipient not be taken by the Recipient to his Gujarat state. He just delivered the goods and charged igst according to GSTIN provided by the Recipient of other state and it has been presumed that the movement of goods be terminated at Gujarat.
2. Other question is in mind that the Supplier knew very well that the Recipient would use the goods purchased from him at works contract site which is adjacent to the Supplier place of business. The Recipient would not take goods to the Gujarat. In this case which tax is to be charged when movement of goods terminated in Mumbai and Recipient is of Gujarat. According to section 10 (1)(a) of the IGST Act place of supply shall be the location of the goods at the time at the time at which the movement of goods terminates for delivery to the Recipient. According to this provision termination of movement was happened in Mumbai, therefore CGST & SGST should be charged.
Now I analysis section 10 (1)(b) of the IGST Act. This section is reproduced as under:
“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; “
The limbs of this section are as under:
1. The goods are delivered by the Supplier;
2. To a recipient or any other person;
3. Before or during movement of goods;
4. Place of supply shall be the principal place of business of such person. (Such person refers to the Recipient or any other person).
Please note there are other limbs also in this section but I have taken only those limbs which pertain to the above said example.
In this section 10 (1)(b) as I understand that place of supply shall be principal place of business of the Recipient if the goods are delivered by the Supplier to the Recipient. Termination point is not required and movement of goods is also not required under section 10 (1)(b).
I suggest, in the above example where the goods are delivered by supplier to the Recipient and the supplier very well knew that goods be used by the Recipient in Mumbai and not be taken by him to Gujrat even then the tax should be charged as IGST by the Supplier according to section 10 (1)(b) of the IGST.
The section 10(1)(b) of the IGST would cover sale in transit by transfer of title of goods.
The section 10(1)(b) of the IGST also allows the Supplier to hand-over the delivery of goods to the third person on the direction of the principal recipient. For example the Supplier sends the goods to Job Worker on the direction of the principal recipient or goods sends to the West Bengal on the direction of principal recipient who is registered dealer of Delhi.
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