Determination of Place of Supply of Goods under GST

Determination of Place of Supply of Goods under GST

Before we discuss about the provisions for determining place of supply of goods, we should be aware of the following terms:

  • Goods: Goods means any kind of movable property other than money or securities, includes actionable claim (like insurance claim, pending litigations, lottery, betting and gambling), growing crops, grass and things which are attached to or which forms the part of land which are agreed to be severed before supply or under a contract of supply
  • Supply: It means supply of goods or services or both, whether by way of sale, exchange, transfer, barter, license, lease, disposal, rental which are made or agreed to be made for a consideration in the course or furtherance of business.

Now, let us understand, why place of supply needs to be determined:

In order to determine, whether a supply is an inter-state or intra-state, two things are need to be identified, i.e. location of supplier and place of supply.

A supply is called to be an inter-state supply, if location of supplier and place of supply are in two different states, two different union territories, or in in different state and union territory.

And, a supply is called to be an intra-state supply, if location of supplier and place of supply are within same state or same union territory.

Determination of place of supply

Under GST law, location of supplier of goods is not defined, but in general terms we can understand it to be a location from where supplier is engaged in supply of goods.

However, we can determine the place of supply of goods with the help of provision of Section 10 and Section 11 of IGST Act 2017.

Section 10 of IGST Act 2017, determines the place of supply of goods dealt domestically, i.e. other than import into or export from India.

Section 11 of IGST Act 2017, determines the place of supply of goods dealt internationally i.e. related to import and export from India.

Let us understand, each of the provision of Section 10 and Section 11 of IGST Act 2017 with the help of examples.

Section 10 : Determination of place of supply of goods where goods are supplied domestically

Case 1 :

Where the supply involved movement of goods, place of supply will be the place where goods are delivered to the recipient.

Example: Suppose Mr. A (Registered in Delhi) ordered an air conditioner from Mr. B (Registered in Haryana) to be supplied at his location in Haryana. In this case, place of supply will be Haryana since goods are delivered to Mr. B in Haryana.

Case 2 : 

Where goods are supplied by a supplier to a recipient on directions of the third party. (This can be called as bill to ship to model, means billing is done in another person’s name and goods are shipped to another’s). In this case third party can act either as agent or any other person and it shall be deemed that such third party has received the goods and place of supply will be the location of such person.

Example: Mr. A (Registered in Mumbai) asked a supplier Mr. B (Registered in Delhi) to supply a television set to Mr. C (Residing in Haryana). In this case, Mr. B will supply television set to Mr. C on the direction of Mr. A and billing will be done by Mr. B in the name of Mr. A, hence this is a bill to ship to model and place of supply will be location of Mr. A i.e. Mumbai

Case 3 :

Where supply does not involved movement of goods, the place of supply shall be location of such goods at the time of supply.

Example: let’s take an example of sale and leaseback, where Mr. A sold his fully furnished apartment located in Delhi with Air conditioner attached in it to Mr. B and then Mr. A leased back this apartment from Mr. B. In this case, place of supply of air conditioner will the Delhi, since it does not involve movement of goods at the time of supply let’s take an example of sale and leaseback, where Mr. A sold his fully furnished apartment located in Delhi with Air conditioner attached in it to Mr. B and then Mr. A leased back this apartment from Mr. B. In this case, place of supply of air conditioner will the Delhi, since it does not involve movement of goods at the time of supply

Case 4 :

Where the goods are assembled or installed at site, the place of supply shall be the location where the goods are assembled or installed.

Example: Mr. A purchase machines from Mr. B to be installed in his factory located at Delhi. The place of supply for such machinery will be Delhi, where such machinery is installed.

Case 5:

Where the goods are supplied on board a conveyance including a vessel, an aircraft, a train, or a motor vehicle, the place of supply shall be the location  at which such goods are taken on board.

Example: Mr. A (Registered in Delhi) took a train from Uttar Pradesh to Jammu and Kashmir and purchased a bag while on the journey in that train, the place of supply shall be Uttar Pradesh.

Section 11: Determination of place of supply of goods where goods are supplied Internationally

Now, Lets discuss about place of supply as per the provisions of Section 11 of IGST Act 2017, which is applicable in case where goods are imported or exported from India.

But before discussing provision of Section 11of IGST Act 2017, let us be aware of the following terms:

Import of Goods: It means bringing goods in India from a place outside India

Export of Goods: It means taking goods outside India from a place outside India.

Section 11(a): Where goods are imported into India, place of supply shall be the location of the importer.

Example: Mr. A residing in Delhi, India ordered an I-Phone from USA, since it is an import of goods, place of supply as per this section will be location of importer, i.e. Delhi

Section 11(b): Where goods are exported from India, place of supply shall be the location outside India.

Example: Mr. A registered in Delhi, India received an order for supply of goods from one of his client in USA and accordingly Mr. A supplied goods to his client in USA, this is an export of goods, so this section will apply and place of supply shall be USA.

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