Place of Supply is important provision in GST. Place of Supply i.e. the place of destination or consumption is deciding who will get the benefit of tax. The State where the Place of supply is situated will get the GST revenue.
The basic principle of GST is that it should effectively tax the consumption of such supplies at the destination thereof or as the case may at the point of consumption.
So place of supply provision determine the place i.e. taxable jurisdiction where the tax should reach.
Tax to be Deducted as per GST Law
The place of supply determines whether a transaction is intra-state or inter-state.
In other words, the place of Supply of Goods is required to determine whether a supply is subject to SGST plus CGST in a given State or else would attract IGST if it is an inter-state supply.
Place of Supply - Goods
Goods being tangible do not pose any significant problems for determination of their place of consumption. The place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
Example: Goods supplied from Tamil Nadu to Delhi. Delhi is the Place of Supply and Delhi gets the Tax Revenue.
If Goods are delivered by the supplier to a person on the direction of a third person, it would be deemed that the third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.
Place of supply of goods in respect of transport of goods by courier
In case the recipient is registered, the location of such person shall be the place of supply. However, if the recipient is not registered, the place of supply shall be the place where the goods are handed over for transportation.
Example:-Place of Supply if goods are couriered.
Registered Person:-Location of the Buyer / Registered Address.
Unregistered Person:-The place where the goods are handed over for transportation / courier.
Place of supply –Services - Challenges
Goods being tangible do not pose any significant problems for determination of their place of consumption. Services being intangible pose problems w.r.t determination of place of supply mainly due to following factors:
(i) The manner of delivery of service could be altered easily. For example telecom service could change from mostly post-paid to mostly pre-paid; billing address could be changed, billers address could be changed, Repair or Maintenance of Software could be changed from onsite to online; Banking services were earlier required customer to go to the bank, now the customer could avail service from anywhere;
(ii) Service provider, service receiver and the service provided may not be ascertainable or may easily be suppressed as nothing tangible moves and there would hardly be a trail;
(iii) For supplying a service, a fixed location of service provider is not mandatory and even the service recipient may receive service while on the move. The location of billing could be changed overnight;
Construction – More than One State
Sometimes the same element may flow to more than one location, for example, construction or other services in respect of a railway line, a national highway or a bridge on a river which originate in one state and end in the other state.
§ Similarly a copy right for distribution and exhibition of film could be assigned for many states in single transaction or an advertisement or a programme is broadcasted across the country at the same time.
§ An airline may issue seasonal tickets, containing say 10 leafs which could be used for travel between any two location in the country.
§ The card issued by Delhi metro could be used by a person located in Noida, or Delhi or Faridabad, without the Delhi metro being able to distinguish the location or journeys at the time of receipt of payment.
Services are continuously evolving and would thus continue to pose newer challenges. For example 15-20 years back no one could have thought of DTH, online information, online banking, online booking of tickets, internet, mobile telecommunication etc.
Proxies or assumptions
Proxies or assumptions in a transaction can be used to determine the place of supply. The various element involved in a transaction in services can be used as proxies to determine the place of supply.
An assumption or proxy which gives more appropriate result than others for determining the place of supply, could be used for determining the place of supply.
The same are discussed below:
(a) The location of service provider.
(b) The location of service receiver.
(c) The place where the activity takes place/ place of performance.
(d) The place where it is consumed; and
(e) The place/person to which actual benefit flows