- What is the place of supply under GST?
- Why is the place of supply important?
- Determining the place of supply for a particular transaction
- Impact of the place of supply on your taxable transactions
What is the place of supply under GST?
The place of supply for a GST transaction is the location of the person receiving the goods or services.
Why is the place of supply important?
The place of supply determines whether a transaction is intra-state, inter-state, or import-export. This in turn determines which taxes apply: a combination of central (CGST) and state (SGST) taxes, or an integrated tax (IGST), with or without additional duties.
Determining the place of supply for a particular transaction
There are two locations that are important for determining a transaction’s tax liability under GST, and both are listed on the tax invoice. They are:
- Location of Supplier: the seller’s registered business location, or the place from which the goods or services are dispatched.
- Place of Supply: In most cases, this is the buyer’s registered business location, or the place where the goods or services are received.
- However, there are some special cases under sections 10 and 11 for goods, and sections 12 and 13 of the IGST law where the place of supply can be different for goods and services.
Place of supply for goods under different scenarios
- When goods are transported between two places, the place of supply for this transaction is the final place, where the goods are delivered.
- When goods are supplied by a seller to another person under the direction of a third party, then in this case, the place of supply of this transaction will be the location of the third party and not the location where the goods are delivered.
- Example: When you buy a gift and ship it to your friend via Amazon or any other e-commerce website, the place of supply for this order will be your address and not your friend’s address.
- Whenever goods are not moved either by the seller or by the buyer/recipient during a transaction, the place of supply will be the location of goods at the time of delivery to the buyer/recipient.
- Whenever goods are assembled or installed by a seller/supplier at a particular location, that location will be deemed as the place of supply.
- When goods are supplied to a recipient onboard a ship, aeroplane, bus or any mode of transport, the point where these goods are brought onboard the transport is taken as the place of supply.
- When goods are imported into India, the location of the importer is considered as the place of supply. When goods are exported from India, the place of supply will be the delivery location that’s outside India.
Place of supply for services under different scenarios
General rules
- When both the service provider and recipient are registered taxpayers, the place of supply for the services rendered will be the location of recipient.
- When a registered taxpayer/supplier provides services to an unregistered person/consumer, the place of supply for this transaction will be the location of the consumer if the consumer’s address exists on the invoice. If the consumer’s address is unavailable, then the location of the supplier will be taken as the place of supply.
Place of supply for certain services is not covered under general rules
| Service | Place of Supply |
|---|---|
| Services related to immovable property (like construction, interior decoration or repair of houses, offices, house boats, etc. Also includes services related to events held at these places) | Location of the property. |
| Event based admission services (artistic, educational, entertainment, etc., including theatres and theme parks.) | Location where the event takes place. |
| Services related to organisation and management of events. | For B to B transactions: Location of the recipient. For B to C transactions: Location where the event is held. |
| Goods transport services. | For B to B transactions: Location of the recipient. For B to C transactions: Location where the goods are delivered. |
| Passenger transport services. | For B to B transactions: Location of the recipient. For B to C transactions: Location where the passenger got onboard the vehicle. |
| Conveyance services (air, road, rail or sea). | First point where the journey begins. |
| Telecommunication and media services. | Fixed line, dish antennas & leased internet circuits: Location where these entities have been installed. Post Paid communication: Address of the recipient. Pre-paid communication: Location of the selling agent or the place where payment vouchers are collected for the same. For all other cases: Location of the recipient or the supplier (when recipient information is unavailable). |
| Banking, stock brokering and other financial services. | Location of the recipient or the location of the supplier (when recipient information is unavailable). |
| Insurance services. | Location of the recipient/address of the recipient on the invoice(s). |
Place of supply for import and export of services from/to a location outside India
- For such transactions in general, the place of supply will be considered as the location of the recipient of services (if this is absent from the records of the supplier during exports, then the location of the supplier will be considered as the place of supply).
- In cases where goods are imported into India so that they can be serviced and then exported back, the place of supply is considered to be outside of India. In such cases, the goods should not be used in India.
- For remote services (For example, after sales support given electronically or using a person representing the supplier) associated with goods provided to a recipient outside India, the place of supply for such services will be the physical location of the goods.
- The place of supply for the following services shall be the location of the supplier of these services:
- Services offered by a banking company or a financial company (banking or non-banking) to their account holders.
- Intermediary services (services that facilitate the provision of other services like those offered by a broker);
- services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.
- For information and database access or retrieval services offered online, the place of supply shall be the location of the recipient.
Impact of the place of supply on your taxable transactions
If the location of supplier and the place of supply are in the same state, then the sale is an intra-state transaction and will incur both CGST and SGST.
For example, if a registered supplier in Madhya Pradesh delivers their goods or services to a buyer who is also in Madhya Pradesh, then it is an intra-state transaction and the buyer must pay a combination of CGST and SGST.
If the supplier is in a different state from the buyer, then the sale is an inter-state transaction and will incur IGST.
For example, if a registered supplier in Madhya Pradesh delivers their goods or services to a buyer who is located in Karnataka, then it is an inter-state transaction and the buyer must pay IGST.
If either the buyer or the seller is a foreign party, the transaction is treated as an import or export depending on the case. That said, imports and exports are also treated similar to an inter-state supply (in terms of place of supply and taxation) and will incur IGST. There are special circumstances if the seller is a foreign party who is related to the buyer — as long as the goods are only for the buyer’s consumption and not for resale, the transaction won’t incur GST.
Note:
- Under GST, transfer of stock between your own business locations is considered a supply even though it is technically not a sale. Intra-state stock transfers will not incur GST, but transferring stock between company locations in different states will incur GST
- In case of imports, you will also find a basic custom duty levied along with an IGST on the supply received.
You can find more details about interstate supply under GST in Article 269A of the GST Law. You can also refer to the IGST law from here that talks about place of supply in detail.
