What is the Need for the Place of Supply of Goods and Services under GST?

  • Blog|GST & Customs|
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  • By Taxmann
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  • Last Updated on 4 January, 2021
The basic principle of GST is that it should effectively tax the consumption of supplies at the destination thereof or as the case may at the point of consumption. So place of supply provision determines the place i.e. taxable jurisdiction where the tax should reach. 
 
The place of supply determines whether a transaction is intra-state or inter-state. In other words, the place of supply of goods or services is required to determine whether a supply is subject to SGST plus CGST in case of intra-state supply or IGST if it is an inter-state supply. 
 
It further determines the taxability of a transaction as any supply where the place of supply is outside India viz. exports are regarded as zero-rated supply in case the supplier is located in India. In case of export of services, merely place of supply being outside India doesn’t make it an export supply. There are other conditions as well to satisfy if it is an export of service. 

Whether place of supply principles always relevant for identifying the State where registration is to be obtained

No, as in most of the cases, the place of supply is derived from the location of the recipient of supply. In case the place of supply would have been same as place where registration is to be obtained then every supply would have been intra-State and there would have been no need of IGST.

What is the significance of “Location” of a Service Provider or Receiver for determining taxing jurisdiction

The location of supplier of goods or services is important as it is one of the parameter for determining whether the supply is inter-State or intra-State and accordingly which type of tax is to be paid. Further the place of supply which is the other determinant of nature of supply is usually the location of the recipient of supply specifically in respect of services.   Further the jurisdiction of the field formation, which is relevant for compliance with registration formalities, filing of returns, refund claims etc. by the person liable to pay tax (provider or receiver as the case may be), will be the “location” as determined in terms of these rules.

How will the “location of supplier or recipient of goods” be determined

The location of supplier of goods has not been defined under GST law, the reason thereof may be that the goods being tangible in nature is easy to identify the location of supplier and recipient. Generally, the location of supplier would be the place from where the goods are supplied and location of recipient being place where the goods are received and consumed.

How will such “location of supplier or recipient of services” be determined

As per section 2(14) and (15) of IGST Act, the location of a service provider or receiver (as the case may be) is to be determined by applying the following steps sequentially: 
 
a) where the supply is made from/received at a place of business for which registration has been obtained, the location of supplier/ recipient of services would be the location of such place of business. 
 
b) where the supplier/recipient of is not covered by a above: 
 
   (i) where supply is made from/received at a place of business for which registration has been obtained (a fixed establishment elsewhere), the location     of such establishment; 
 
  (ii) where supply is made from/received at more than one establishment   whether the place of business or fixed establishment, the location of the   establishment most directly concerned with the provision or receipt of the    service; and 
 
  (iii) in the absence of such places, the usual place of residence of the    supplier  or the recipient. It is important to note that in the case of a service    receiver, the place relevant for determining location is the place where the   service is “used” or “consumed”.
 

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