It is very important to understand the term ‘place of supply’ for determining the right charge of tax on ‘supply’.
GST law is based on the destination principal, in which goods/services are taxed in the state in which they are consumed/used. CGST/SCGT is to be levied only on intra-state supply. To know whether a supply is intra-state or not we need set of rules, known as Place of Supply rules.
Supply of goods/services shall be intra state if Location of Supplier and Place of supply are in same State (except in cases where it has been expressly provided otherwise eg Sale to a foreign Tourist, sales to SEZ etc)
How to determine the Place of Supply of Goods:
1. Where a supply involves movement of goods:
For Sale in Transit: Goods are supposedly received by the first buyer and his principal place of business is the place of supply.
For Bill to / Ship to Movement: Goods are supposedly received by Bill to Person and his principal place of business is the place of supply
For Direct Movement: Location where the Movement Terminates is the place of Supply
2. Where a supply does not involves movement of goods:
For Over the counter sale : Place of supply shall be the “Location of such goods at the time of the delivery” to the receiver.
For Assembled Goods : Place of supply shall be the place of such installation / assembly.
3. Where goods are supplied on board of a conveyance (like on vessel, aircraft, train or motor vehicle): Place of supply shall be the “Location at which such goods are taken on board”.
4. Where place of supply cannot be determined in terms of above, then it shall be determined in accordance with the law made by Parliament on the recommendation of Council.
The above rules are subject to the following exceptions:
a) When goods are supplied to a tourist, a person not normally resident in India who enters India for a stay of not more than six months for legitimate non-immigrant purpose, the above supply will not be treated as Intra-state supply.
b) When goods are supplied to SEZ Developer / SEZ Unit, it shall be treated as an Inter-State supply. Even if the unit is located in the same state as that of supplier it will not be treated as intra-state supply.
c) For goods exported outside India, Place of Supply shall be the location outside India.
d) When goods are Imported into India, Place of Supply is the location of importer and it shall be treated as an inter-state supply.
Place of Supply of Services:
Before going ahead to discuss place of Supply of Services, we must have the understanding of “Location of Service Provider” and “Location of Service Receiver”.
Location of Service Provider means:
- Location of Business Establishment:(where a supply is made from a business establishment registered under GST Law);
E.g. A Ltd is providing service from its office located at Mumbai and also get same office registered under GST law. In this case Location of Business Establishment is Mumbai.
- Location of Fixed Establishment:(where a supply is made from a place not registered under GST Law);
g A Ltd. is also providing service from its office located at Nashik (for this office registration is not taken). In this case Location of Fixed Establishment is Nashik.
- Where a supply is made from more than one establishment, whether business or fixed, the location of the establishment most directly concerned with the provision of the supply ;
- In absence of such places (1 to 3 above), the location of the usual place of residence of the person;
Location of Service Receiver means:
- Location of Business Establishment: (where a supply is received at a business establishment registered under GST Law).
g. Z Ltd. received service at its office located at Mumbai and also get same office registered under GST law. In this case Location of Business Establishment is Mumbai.
- Location of Fixed Establishment:(where a supply is received at a place not registered under GST Law).
g. Z Ltd. also received service at its office located at Nashik (for this office registration is not taken). In this case Location of Fixed Establishment is Nashik.
- Where a supply is received at more than one establishment, whether business or fixed, the location of the establishment most directly concerned with the receipt of the supply;
- In absence of above said places, the location of the usual place of residence of the person;
How to determine Place of supply of a Service:-
General Provision:
Where a service is provide to a registered person, then place of supply shall be the “Location of such service receiver”.
Where a service is provided to an unregistered person then place of supply shall be the “Location of service receiver” if address on records is available, otherwise “Location of service provider”
Specific Provisions (applicable to all cases other than where the location of the supplier or recipient is outside India) for services :
Place of supply shall be as follows:-
1. Service related to immovable property:
If the property is located within India then Place of supply is the location where such immovable property is located.
If the property is located within India, but in more than one state, then Place of supply will be taken proportionately as per the contract or some other basis.
Where the property is located outside India, the place of supply is the location of the recipient.
2. The place of supply of restaurant and catering services and services in relation to personal grooming, fitness, beauty treatment, health services including cosmetic and plastic surgeryshall be the location where the services are actually performed.
3. The place of supply of services provided by way of admission to a cultural, artistic, sporting or educational eventor any other place and services ancillary thereto, shall be the event venue.
4. In case of organisation of a cultural / artistic / sporting / scientific / educational / entertainment event including supply of services in relation to conference / fair / exhibition or celebrationthe place of supply will be determined as follows:
Supply is made to a registered person, it shall be the location of the registered person.
Supply is made to a non- registered person for an event held in India, it shall be the location of the event.
Supply is made to a non- registered person for an event held outside India, it shall be the location of the recipient
5. The place of supply of services by way of transportation of goods, including by mail or courier to,
(a) a registered person, shall be the location of such service receiver;
(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.
6. The place of supply of passenger transportation serviceshall be the place as determined below :
(a) If the supply is made to a registered person, it shall be location of such service receiver.
(b) If the supply is made to a unregistered person, the place of supply shall be the place of embarkation known at the time of supply and if the place of embarkation is not known and the address of the recipient is known it shall be the address of the recipient, Else it will be the location of the supplier.
7. The place of supply of services on board a conveyance such as vessel, aircraft, train or motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.
8. The place of supply of banking and other financial services including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services:
However where the location of the service recipient is not available on the records of the supplier, the place of supply shall be location of the supplier of services.
9.The place of supply of services by way of training and performance appraisalto,
(a) a registered person, shall be the location of such service receiver;
(b) a person other than a registered person, shall be the location of the actual performance.
10. The place of supply of Insurance services to,
(a) a registered person, shall be the location of such service provider;
(b) a person other than a registered person, shall be the location of the service receiver’s known location.
11. In the case of advertisement service to Government authorities, where the service spans multiple states the same is to be bifurcated based on dissemination.
12. For telecommunication services(including Data Transfer / Broadcasting / cable and direct to home television) the following is the basis for determining the place of supply:
a) Where is service is provided by Fixed / leased line / internet leased circuit / cable or dish antenna, the place of supply will be the location of the installation.
b) In case of post paid mobile connection the recipient’s billing address.
c) Where the connection is a prepaid connection and is
(i) provided through an agent or distributor it shall be the address of the agent / distributor.
(ii) provided through any other person it shall be the location where such payment is received.
(iii) other than (i) and (ii) above or through internet banking, if the address of recipient is available on record, the location of the recipient, else it shall be location of supplier of services.
Specific Provisions (applicable to all cases where the location of the supplier or recipient is outside India) for services :
a) Services supplied to an individual (either recipient or person acting on his behalf) which require the physical presence of the individual:
Place of supply will be the location where the services were actually performed. It will be the location in taxable territory when services were performed in more than one location including a location in taxable territory.
b) Services which are provided by electronic means:
Place of supply will be where the goods are located at the time of supply of services. It will be the location in taxable territory when goods are located in more than one location including a location in taxable territory.
c) Services in respect of goods which are required to be made physically available to the supplier of service :
Place of supply will be the location where the services were actually performed. It will be the location in taxable territory when the services were performed in more than one location including a location in taxable territory.
d) Services supplied directly in relation to an immovable property :
Place of supply will be where the immovable property is located or intended to be located. It will be location of immovable property in taxable territory Where such immovable properties are located in more than one location including a location in taxable territory
e) Services by way of Admission to / organisation of an event or ancillary to that :
Place of supply will be location where the event is actually held. It will be the location in taxable territory where the event is held in more than one location including a location in taxable territory.
f) Services supplied by a banking company, or financial institution or a non-banking financial company to account holders: Place of supply will be Location of the supplier.
g) Intermediary services: Place of supply will be Location of the supplier.
h) Services consisting of hiring of means of transport, including yachts but excluding aircraft and vessels:– Place of supply will be Location of the supplier.
i)Services of Transportation of goods other than by way of mail or courier:Place of supply will be place of destination of goods.
j) Passenger Transportation Services:Place of supply will be the place where the passenger embarks on the conveyance.
k) Services provided on board a conveyance during the course of passenger transport operation:
Place of supply will be first scheduled point of departure.
l) Online information and database access or retrieval services:
Place of supply will be the location of the recipient.
m) Any other service: Place of supply will be the location of the recipient of Services.