Concept of Place of Supply under Gst Explained Rules
Quick Summary
- GST is a destination-based tax, meaning taxes are collected where goods or services are used, not where they are made.
- The place of supply under GST determines if a transaction is intrastate or interstate, affecting the type of GST applied.
- Sections 10, 11, 12, and 13 of the IGST Act define rules for determining the place of supply for goods and services.
- Imports into India are taxed with IGST, while exports are zerorated, allowing exporters to claim tax refunds.
- Input Tax Credit (ITC) may be restricted if the place of supply and the recipient's location are in different jurisdictions.
GST is a destination-based tax, meaning that the goods/services are taxed at the point of consumption rather than the point of origin. So that state would have the authority to collect GST where they are consumed. As a result, the place of supply is essential under GST because it is the focal point of all its requirements. The GST place of supply determines whether a transaction qualifies as intrastate or interstate and, as a result, how much SGST, CGST, and IGST will be levied. Therefore, cross-checking a supplier’s place using the GST search tool is recommended.
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Sections Under Place of Supply
The location of the place of supply is determined according to sections 10, 11, 12, and 13 of the IGST acts.
- IGST Section 7 addresses interstate supply: Per section 7, supplies used in interstate trade or commerce must be treated.
| Supply | Terms For Supply To Be Treated as the supply of Goods or Services in the course of inter-state trade or commerce |
|---|---|
| Supply of goods or services | Subject to Section 10 (goods) or Section 12 (services), where the provider and the site of delivery are located in: Two different states / Two different Union territories / A state and a Union territory |
| Imports | Himachal Pradesh |
| Export and SEZ | When a supplier is located in India and the place of supply is outside India / Supply to SEZ developer or unit / Supply within taxable area but not intra-state |
- The IGST’s Section 8 addresses intra-state supply.- According to section 8 following supplies shall be treated as intra-state supplies.
| Supply | Terms For Supply To Be Treated as a supply of Goods or Services As Intra-State Supply |
|---|---|
| Supply of goods or services | When supplier and place of supply are in the same state or union territory, subject to Sections 10 & 12 |
| Goods supplied shall not be considered an intra-state supply | Supply to/by SEZ unit, Items brought into India before customs clearance, Goods supplied to tourists (Section 15) |
| Services provided shall not be considered an intra-state supply | Services to/by SEZ developer or SEZ unit |
- Section 10 – A location where goods are supplied other than those imported into or exported from India.
- Section 11 – The location where products imported into or exported from India are supplied.
- Section 12 – Place of supply of services where the location of supplier and recipient is in India
- Section 13 – Place of supply of services where the location of supplier or recipient is outside India
Place Of Supply When There Is a Movement of Goods
| Supply Type | Place Of Supply |
|---|---|
| Involves the movement of goods (by supplier, buyer, or any other person) | Location of goods when recipient is reached and movement has ended |
| Transfer before/during transport (title transfer or documentation, via seller to third party) | Third party’s principal place of business |
Place Of Supply When There Is No Movement of Goods
| Supply Type | Place Of Supply |
|---|---|
| No movement of goods (by supplier or recipient) | Location of goods at time of delivery/transfer of ownership |
| Goods assembled/installed at site | Place of installation or assembly |
Place Of Supply-Goods Supplied On a Vessel/Conveyance
| Supply Type | Place Of Supply |
|---|---|
| Goods on board vessel, train, aircraft, or motor vehicle | Location at which goods are taken on board |
Imports and Exports under Place of Supply
The place of supply of goods:
- The importer’s location will be imported into India.
- Location outside of India must be specified as being exported from India.
| Supply Type | Place Of Supply | GST |
|---|---|---|
| Products imported into India | Importer’s location | IGST is always applied to imports |
| Products exported from India | Location outside India | Exports are zero-rated (eligible for refund) |
Additionally, anytime an Indian company issues a foreign currency invoice. GST can be charged in other currencies, but you’ll need to provide the INR translation rate and IN values.
If you raised money in US dollars (USD), you might also charge GST in USD. Additionally, you must provide the invoice value in INR and the USD to INR conversion ratio.
To conclude, you can use a GST accounting software such as BUSY Accounting Software , to manage all your GST related tasks seamlessly.
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Place of Supply – Imports and Exports
Place of supply meaning in the context of imports and exports, determining the place of supply is crucial for calculating GST correctly. When goods are imported into India, the place of supply is always considered to be India, regardless of the country of origin. This is because goods are consumed within the country, making India the place of supply. Importers need to pay Integrated Goods and Services Tax (IGST) on these goods at the time of import, which they can later claim as input tax credit to offset their GST liabilities.
For exports, the situation is different. Goods or services supplied from India to another country are considered exports, and the place of supply is treated as outside India. Exports are zero-rated under GST, which means they are not subject to tax, but exporters can claim a refund on the taxes paid for inputs. This provision supports Indian exporters by reducing their tax burden and improving their competitiveness in the global market.
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