Place of Supply in GST: Meaning, Rules, Importance & Example

Place of supply in GST is crucial for determining the tax. It helps in deciding if the transaction is intrastate or interstate. Based on this, the levy of IGST, CGST and SGST is decided. It includes the state or union territory that will get the GST tax. If, you are a business person, you will hear the term place of supply in GST. It is important to know the place of supply which helps to pay SGST or IGST. This blog will explain the place of supply in GST with a step-by-step process.

What is the place of supply in GST?

Goods and services tax is based on destination. It is taxed at the place of consumption. It excludes the original place. So, the state that consumes the goods or services has the right to collect GST.

• The place of supply in GST is vital
• It includes all the provisions of GST
• The provisions in the IGST Act explain the place of supply in GST
• This decides if the transaction is interstate or intrastate
• Based on the place of supply under GST, you need to pay IGST, CGST and SGST

Place of supply of services under GST

GST is a consumption tax. It means the place of consumption levies this tax.

Under GST, you can find three types of taxes. CGST, SGST/UTGST, and IGST are levied under GST.

The place of supply of services under GST is generally the location of the service recipient, except in specific cases where the law prescribes otherwise. In this way, the government levies the respective tax.

• The government collects Integrated GST in case of inter-state transactions
• CGST and SGST are collected in intra-state business.

If you are providing services to an unregistered dealer.  In case the location is not available, then the location of the service provider is the place of provision of services.

Special provisions are also there. It applies to the following:

• Telecom
• Restaurants and Hotels
• Services to immovable property
• Events
• Banking
• Insurance
• Finance

Place of supply of goods under GST

Place of supply in GST applies to Goods also. It is based on movement, delivery, or installation, as per Section 10 of the IGST Act. In case of non-moving goods, where movement of goods terminates for delivery to the recipient at the time of delivery. For instance, if you are a seller at the supermarket, the place of supply is the supermarket itself.  In the case of installing or assembling goods, the installation location is considered the place of supply. For example, if you are a supplier in Kolkata and you are supplying machines to someone in Delhi. Now, your customer in Delhi is installing this machine in Bihar. The place of supply will be Bihar.

What is the importance of the place of supply in GST?

The place of supply in GST is important. We need to understand how the place of supply under GST can help the taxpayers. These are the following:

• If you have paid the wrong taxes based on a wrong classification. You can claim the refund
• Wrong classification of supply between intra-state and interstate leads to hardship for a taxpayer. This is mentioned in the section 19 IGST Act.
• Moreover, the taxpayer needs to pay the correct tax. It includes the interest amount for the delay based on the revised classification.
• The correct place of supply helps us to understand the incidence of tax.
• Where the place of supply is outside India and export conditions are fulfilled, the supply is treated as zero-rated under GST.

The place of supply under GST in terms of moveable goods

The place of supply in GST applies to the movable goods. This is based on:

Place of supply in GST: Non-moveable goods

The non-moveable goods come under this. It applies to:

Here are some instances to make it clearer.

For example, ABC Sales Pvt. Ltd. from Chennai is opening a new showroom in Bangalore. They purchase a building for a showroom from XYZ in Bangalore. In this case, Central GST and State GST apply. No movement of goods because they are purchasing an office space. The place of supply is determined to the location at the time of handing over the property to the buyer.

Location of the supplier of services

This is one of the important concepts in the place of supply in GST. It is:

Location of the recipient of services

This includes,

Closing thoughts

The place of supply in GST is one of the most important concepts in GST law. Understanding the basics helps in charging the right tax structure. The place of supply decides where the tax goes. The right place of supply in GST means the correct GST. So, understanding this helps you to make your GST compliance stress-free. If you still have some questions, contact Online Legal India today.

FAQs

1. What is the Place of supply under GST in Simple words?

It is the location in which goods or services are considered supplied for Goods and Services Tax.   

2. Why is the place of supply in GST important?

The location of the supply in GST determines whether you pay Central GST, State GST, or Integrated GST.

3. What happens when the place of supply is wrong?

In this case, the wrong tax will be charged. As a taxpayer, it will lead to confusion for you.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.