Bavesh Kumar Jain. D
Place of Supply & Time of Supply of Goods and/or Services under Goods and Services Act, 2016 (GST Act, 2016)
Introduction:
In this article, provisions relating to Place of Supply (“POS”) and Time of Supply (“TOS”) of Goods and/or Services as given in (Draft) Model Goods and Services Act, 2016 (“GST Act”) and Integrated Goods and Services Act, 2016 (“IGST Act”) released in June, 2016 are presented.
Basic Features of GST:
Before discussing Place and Time of supply, would like to highlight few basic features of GST as follows:
σ It is destination based taxation system i.e. goods or services are taxed in the place where they are received or consumed as the case may be. Due to this feature few States did not support the biggest ever indirect tax reform due to loss of revenue to State Government.
σ Concept of Supply – It includes all forms of supply and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in course of business. It also includes import of services with or without consideration and also includes supplies specified in Schedule I of GST Act.
σ It is a dual taxation system i.e. SGST and CGST both would be levied on Intra-State supplies and for Inter-State supplies; IGST (Sum of SGST and CGST) would be levied. Hence prevailing concepts of manufacturing of goods, provision of servicesand sale of goods would no longer be relevant as tax would be levied on “supply” of goods and/or services.
σ Inter-state supplies are governed by the IGST Act and additional provisions of GST Act will also be applicable.
σ Reverse Charge Mechanism as present under Service Tax Law is there for both goods and services under GST. But specific applicability and scope of supplies will be released by notification by council or Government.
Principles for determining whether the supply is Inter-State or Intra-State:
As per Section 3 of IGST Act, Supply of goods and/or services shall be Inter-State, if “Location of Supplier” and “Place of Supply” are in different States.
As per Section 3A of IGST Act, Supply of goods/services shall be Intra-State, if “Location of Supplier” and “Place of Supply” are in same State.
Comments:
σ Principle of distinction between Inter-State supply and Intra-State supply is crucial because under destination based taxation system tax would be collected by the state receiving the supply instead of originating state,
σ Intra-State supply is not defined under GST Act, instead provisions are given under IGST Act.
σ The conclusion about the type of supply from the above two principles can be made only after thorough understanding of the two components namely Location of Supplier and Place of Supply(POS) and the same are discussed below.
σ For determining the POS we have to look at Section 5 for POS of Goods and Section 6 for POS of Services of IGST Act.
Place of Supply of Goods
Provisions of POS of Goods are elucidated in Section 5 of Chapter IV of the Integrated Goods and Services Act, 2016 as follows:
|
Particulars |
POS (and Remarks) |
| Movement of goods is involved by supplier or recipient or any other person | Location of goods at the time of termination of delivery (Completion or End of delivery). |
| Goods are delivered by supplier to a person on a direction of 3rd Person | Principal business place of such 3rd person and he would be deemed to have been received the goods. |
| Supply does not involve movement of goods like Erection of a Machine | Locations of goods at the time of delivery to the recipient |
| Goods are assembled or installed at site | Place of installation or assembly. |
| Supply of goods on board a conveyance (like vessel, aircraft, train, Motor vehicle) | Location at which the goods are taken on board |
Place of supply of Services
Provisions of POS of Services are elucidated in Section 6 of Chapter IV of the Integrated Goods and Services Act, 2016 as follows:
| Sub-Section |
Service Description |
POS (and Remarks) |
| Residual sub-section for services provided other than covered under sub-section (4) to (15):- | ||
| (2) | (a) To a Registered Person | Location of such person. |
| (3) | (b) To a Un-registered Person | Location of recipient where the address is available else location of supplier of service. |
| (4) | For the below services provided to any person | Location at which the immovable property or vessel or boat is located or intended to be located. |
| (a) Relating to Immovable Property, including services of architects, interior decorators, surveyors, engineers and grant of rights to use immovable property or for carrying out or co-ordination of construction work. | ||
| (b) Lodging accommodation by a hotel, inn, guest house, homestay, club or campsite and including a house boat or any other vessel. | ||
| (c) Accommodation in any immovable property for organizing any marriage or reception or matters related therewith, official, social, cultural, religious or business function including services provided in relation to such function at such property. | ||
| (d) Ancillary services to clause (a), (b), (c). | ||
| Explanation – If the place is more than one state, supply of service would be apportioned based on contract or agreement else on some reasonable basis as may be prescribed. | ||
| (5) | Restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery | Location where the services are actually performed. |
| (6) | Services relating to training and performance appraisal: | |
| (a) To a Registered Person | Location of such person. | |
| (b) To a Un-registered Person | Location where the services are actually performed. | |
| (7) | Admission to a cultural, artistic, sporting, scientific, educational, or entertainment event or amusement park or any other place and services ancillary thereto | Location where the event is actually held or where park or such other place is located. |
| (8) | Organization of events and its ancillary services: | |
| (a) To a Registered Person | Location of such person. | |
| (b) To a Un-registered Person | Place where the events are held | |
| (9) | Transportation of goods including mail or courier: | |
| (a) To a Registered Person | Location of such person. | |
| (b) To a Un-registered Person | Location at which the goods are handed over to the person | |
| (10) | Passenger transportation services: | |
| (a) To a Registered Person | Location of such person. | |
| (b) To a Un-registered Person | Place where the passenger embarks (Begins the Journey) on conveyance for a continuous journey | |
| Proviso – Where the right to future use is given, place of supply shall be determined in accordance with sub-sections (2) and (3) | ||
| Explanation – Return Journey shall be treated as separate journey even if the right to passage is for onward and return journey issued at the same time. | ||
| (11) | Services on board a conveyance (like vessel, aircraft, train, Motor vehicle) | Location at which the first scheduled point of departure of that conveyance for the journey. |
| (12) | Telecommunication services including data transfer, broadcasting, cable and direct to home television services to “any person”: | |
| (a) Services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna. | Location of such thing. | |
| (b) Availed on Post-paid basis | Billing address as per the records of the supplier of services | |
| (c) Availed on Pre-paid basis or vouchers | Location where such pre-payment is received or such vouchers are sold. (Proviso – In case the payment is made online, then location of recipient of service on records of supplier will be place of supply) | |
| (13) | Banking and other financial services including stock broking services to “any person” | Location of the recipient of services on the records of the supplier of services. |
| Proviso – If service is not linked to the account of the recipient, place of supply shall be location of supplier of services. | ||
| (14) | Insurance Services: | |
| (a) To a Registered Person | Location of such person. | |
| (b) To a Un-registered Person | Location of recipient of Services | |
| (15) | Advertisement services to CG, SG, statutory body, local authority | Identifiable states shall be location of State. |
| Explanation – If the place is more than one state, supply of service would be apportioned based on contract or agreement else on some reasonable basis as may be prescribed. | ||
Comments:
σ POS for most of cases is the place where the supply is received, since GST is destination based taxation.
σ In comparison of earlier laws, under GST there are separate provisions for determination of POS for B2B transactions i.e. with Registered Person and B2C transactions i.e. with Un-registered Persons. The very purpose of the same is since the Input Tax Credit is available to Registered Persons under B2B Transactions.
σ For service supplies, applicability have to be seen specific sub-sections i.e. from (4) to (15), if the transaction is not covered in any specific sub-sections, POS will determined using residual sub-sections (2) and (3).
σ Specific provisions are given for Agency and Consignment transactions.
σ For supplies on board a conveyance, POS are set as originating point since it is difficult to conclude an ending point in continuous journey.
Location of Supplier:
As per Section 2(65) Goods and Services Act, 2016, location of supplier of service is defined as follows:
> Place of business for which registration has been obtained, if supply is made from such place.
> In case supply is made from the place other than registered, say a fixed establishment, the location of such fixed establishment.
> When the supply is made from more than one establishment, location will be place which is most directly concerned with the provision of supply.
> In absence of any such places, location will be the usual place of residence of the supplier.
Time of Supply of Goods and Services:
Time of Supply of Goods:
Provisions of TOS of goods are elucidated in Section 12 of Chapter IV of the Goods and Services Act, 2016:
| In general cases “Time of Supply of Goods” shall be earlier of the following dates:
> Date of removal of goods by the supplier for supply to the recipient and in case goods are not required to be removed, then it will be the date on which the goods are made available (means goods are placed at the disposal of the recipient) to recipient. [Few cases where goods made available to the recipient: a) Physically not capable of being moved b) To be assembled or installed c) Supply to agent or principal] > Date of issue of invoice by Supplier. > Date of receipt of payment by Supplier. [Date of credit in BoA or in Bank Account whichever is earlier] > Date on which the recipient shows the receipt of goods in his BoA. |
| Continuous supply of goods:
> In case of successive statements of accounts or payments – Time of supply will be date of expiry of each such period to which such successive statements of accounts or payments relate. > For other cases – Time of supply will be date of issue of invoice or receipt of payment whichever is earlier. CG or SG may issue a notification in respect of treatment of supply of goods as a Continuous supply of goods |
| Reverse Charge Mechanism: Time of supply shall be earlier of the following-
> Date of receipt of goods. > Date on which payment is made[Date of debit in BoA or in Bank Account whichever is earlier]. > Date of receipt of invoice. > Date of debit in the BoA. |
| If the goods are removed before it is know whether supply will take place or not, Time of supply will be the date when it becomes known that supply will take place or 6 months from the date of removal, whichever is earlier. [For E.g. Sales made on approval basis] |
| Residual Provision:
Where time of supply is not determinable under above provisions – the time of supply shall be earlier of the below: Due date of filing of periodical return. Date on which CGST / SGST is paid. |
Comments:
Comparing to the earlier regime of indirect taxes, there are drastic changes in taxability and collection provisions in respect of goods.
Receipt of advances from supplier in respect of goods are also liable to GST will arise.
It would be crucial for taxable person to apply provisions because it depends on various factors. For instance, whether goods in transit would attract GST or not.
Time of supply of services:
Provisions of TOS of services are elucidated in Section 13 of Chapter IV of the Goods and Services Act, 2016:
| For general cases Time of Supply of services shall be earlier of the following dates:
If the Invoice is issued within the prescribed period, date of issue of invoice or date of payment, whichever is earlier will be the point in time. If the Invoice is not issued within the prescribed period, date of completion of provision of service or date of payment, whichever is earlier will be the point in time. Where clause (a) or (b) is not applicable, date on which the recipient shows the receipt of services in his BoA. [Date of receipt of payment – Date of credit in BoA or in Bank Account whichever is earlier] |
| Continuous supply of services:
Where the due date for payment is ascertainable from the contract, the time of supply is the date on which the payment is liable to be made by recipient of service, whether or not any invoice has been issued or any payment has been received by the supplier. Where the due date of payment is not ascertainable from the contract, each such time when the supplier of service receives the payment, or issues an invoice, whichever is earlier. Where the payment is linked to the completion of an event, the time of completion of that event. CG or SG may issue a notification in respect of treatment of supply of goods as a Continuous supply of goods |
| Reverse Charge Mechanism: Time of supply shall be earlier of the following-
Date of receipt of services. Date on which payment is made [Date of debit in BoA or in Bank Account whichever is earlier]. Date of receipt of invoice. Date of debit in the BoA. |
| In a case where the supply of services ceases under a contract before the completion of the supply, such services shall be deemed to have been provided at the time when the supply ceases. |
| Residual Provision:
Where time of supply is not determinable under above provisions – the time of supply shall be earlier of the below: Due date of filing of periodical return. Date on which CGST / SGST is paid. |
Comments:
Prescribed period for determination of time of supply is not mentioned. It would be clarified in subsequent law to be released.
Most of the provisions are kept similar like earlier regime POT Rules.
Time of supply of services under RCM has been made in line with the provisions applicable for AE’s as under earlier regime POT Rules.
Change in rate of tax in respect of supply of services
In case of change in rate of tax determination of TOS for services is as per Section 14 of Chapter IV of the Goods and Services Act, 2016:
It starts with non-abstante clause: Notwithstanding anything containedin 13 (i.e. overriding effect), In case of change in rate of effective tax in respect of services, Time of supply shall be determined as follows:
Below events are as “before” or “after” the date in the change in effective tax rate as the case may be:
| Case | Date of Completion of Service (DOC) | Date of Invoice (DOI) | Date of Receipt of Payment* / Consideration (DOP) | Time of supply |
| 1 | Before | After | After | DOP or DOI, whichever is earlier |
| 2 | Before | Before | After | DOI |
| 3 | Before | After | Before | DOP |
| 4 | After | Before | After | DOP |
| 5 | After | Before | Before | DOP or DOI, whichever is earlier |
| 6 | After | After | Before | DOI |
*Date on which the payment is entered in the books of accounts of the supplier or thedate on which the payment is credited to his bank account, whichever is earlier.
Comments:
Provisions are kept similar to Rule 4 of POT Rules of earlier regime.
The above provisions for change in rate of tax are applicable only for supply services, for supply of goods TOS will be determined only as per Section 12 in case of change in rate of tax.
Conclusion:
In simple words, Place of Supply determines where the supply is to be taxed and Time of Supply determines when the supply has to be taxed.
It can be observed that there are many factors for determining the time of supply. Thus following challenges can be faced:
Determining the time of supply & maintaining reconciliation between supplies as disclosed in Return and as per Financials
Mechanism of “Recipient showing the supply” is his BoA.
Disclaimer:
The above analyses of several provisions of GST are only for general understanding of the readers and should not be relied upon before obtaining appropriate professional advice.
For feedback or queries, author could be reached at bhaveshjain2673@gmail.com.
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