Which Government tax is to be paid to (Place of Supply)
On all the inter-state supplies, tax will be levied and collected by central government which will be then shared with the state of consumption of supply. This tax is known as Integrated Goods & Service Tax (IGST) which is equal to CGST + SGST
On all the intra state supplies of goods and/or supplies, both central government and state government will charge their respective share of GST. Tax charged by central government will be known as Central Goods & Service Tax (CGST) and that by state government will be known as State Goods & Service Tax (SGST). CGST is equal to SGST.
Hence, if a particular supply under GST is charged at the rate of say 18%, then CGST would be 9% and SGST would be 9%. And the same supply in case of inter-state would be charged at 18% under the name IGST.
Inter-state supply and intra-state supply of goods and/or services are defined u/s 7 and 8 of IGST Act respectively.
For Domestic Transactions (Except Deemed Exports)
- If the location of supplier of goods/services and place of supply of goods/services, are in the same state, then it would be intra-state supply
- If the location of supplier of goods/services and place of supply of goods/services, are in different states, then it would be inter-state supply
For Overseas Transactions (Including Deemed Exports/Import)
- If either the location of supplier of goods/services is outside India or place of supply of goods/services is outside India, it would be treated as export/import, hence Inter-state supply
- If either the location of supplier of goods/services is in SEZ or place of supply of goods/services is SEZ, then it would be treated as deemed export/import and hence inter-state supply
- If either the supplier of goods/services is a SEZ developer or the recipient of goods/services is a SEZ developer, then it would be treated as inter-state supply
Explanations:
- If a person has separate establishments in different states or in India as well as outside India or an establishment in a state and one or more registered establishments as separate business verticals in that state, then those establishments will be treated as establishments of a distinct person.
- A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory
Most important definition to check if the supply is inter-state supply or intra state supply is PLACE OF SUPPLY.
Place of Supply of GOODS
1. Place of Supply of Goods other than Imported or Exported Goods (i.e., Domestic Transaction of Goods):
| Situation | Place of Supply of Goods |
| If supply involves movement of goods, whether by supplier or by recipient or by any other person
e.g. Online supply of goods, or recipient is far from the goods |
Location of the goods at the time at which movements terminates for delivery to recipient |
| If goods are delivered by the supplier to the recipient or any other person on the direction of recipient, either before or during the movement of goods, by way of transfer of documents of title to goods or otherwise, then it shall be deemed that recipient has received the goods
Analysis: If goods involve movement from one place to another but ownership is transferred, either to recipient himself or his agent, before actual delivery at the recipient’s place (that means risk of wear and tear during the transit is on recipient, not on supplier), then place of supply shall be principal place of business of recipient, not the location of goods at the time of actual delivery. Example: Suppose, Mr. A of Faridabad, purchases a TV from Croma in Delhi. And Croma packs the TV for delivery at A’s residence in Faridabad, but before shipment, Croma hand over the bill to Mr. A and also inform him that product is at A’s risk now during the transit. In this case, place of supply of TV would not be Faridabad but principal place of business of Mr.A. This provision is not correctly worded. If A’s principal place of business is in Noida, then place of supply of goods shall be Noida. No matter if A has purchased the TV for personal purpose or trading purpose. |
Place of supply of goods shall be principal place of business of recipient |
| If supply does not involve any movement of goods, neither by supplier nor by recipient
e.g. Medicine purchased from Medical Store. All OTC product supplies would fall under this clause |
Location of goods at the time of delivery to recipient |
| If goods are assembled or installed at the site | Place of supply of Goods shall be the location of site where assembly or installation is done.
NOTE: Such kind of supplies would normally come under ‘Composite Supplies’ where supply of goods would be bundled with supply of installation service, and supply of goods would be principal supply |
| If goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle | Place of supply of goods shall be the location at which such goods are taken on board |
2. Place of Supply of Imported or Exported Goods (i.e., Overseas Transaction of Goods):
- In case of Import, place of supply of goods shall be the location of importer
- In case of Export, place of supply of goods shall be the location outside India
Place of Supply of Services will follow in our next post….
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