Place of Supply of Goods provisions in Model GST Law

In Model GST Law released by the government, chapter IV of Integrated GST Act covers the provisions relating to Place of Supply of goods and services.

• What is the need of Place of Supply provisions in GST Law?

The answer to this question lies in section 3 of the IGST Act which provides the principles for determining that whether supply of goods or services are in the course of inter state trade or commerce or not.

Section 3(1) covers the supply of goods

The supply of goods in the course of inter-state trade or commerce means any supply where the Location of Supplier and Place of Supply are in different state.

Section 3(2) covers the supply of services

The supply of services in the course of inter-state trade or commerce means any supply where the Location of Supplier and Place of Supply are in different state.

Thus there are two factors (Location of Supplier and Place of Supply) which determine whether a particular supply is an inter state supply or intra state supply. Which means that on the basis of these two factors, it will be determined that whether on a particular supply “CGST or SGST” is charged or “IGST” is charged.

• Now let’s examine the term “Location of Supplier”.

The term location of supplier of service has been defined in section 2(65) of the GST Act, but location of supplier of goods has not been defined. Now let’s examine what’s that section says.

Location of supplier of service means [Section 2(65)]

• Where supply is made from a registered place of business, the location of such place of business.
• Where supply is made from a place other that the registered place of business, e. a fixed establishment elsewhere, the location of such fixed establishment.
• Where supply is made from more than one establishment, the location of the establishment most directly concerned with the supply.
• In all other cases, the location of usual place of residence of the supplier.

• It is also important to see the definition of “Place of Business”

It is also important to see the definition of Place of Business, which is also given in section 2(75) of the Model GST law.

Place of Business means [Section 2(75)]

• A place from where the business is normally carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, provides or receives goods and / or services
• a place where a taxable person maintains his books of accounts
• a place where a taxable person is engaged in business through an agent, by whatever name called.

Place of Supply of Goods

Section 5 of IGST Act covers the provisions relating to Place of Supply of Goods.

1. Transactions involving movement of goods

• Place of supply shall be the location of goods at the time at which the movement terminates for delivery to the recipient.

2. Bill-To Ship-To Transactions

• In such cases, where goods are delivered by a supplier to the recipient on instruction of a third person, it shall be deemed that the third person has received the goods and place of supply of such goods shall be the principle place of business of such third person.

• This can be understood by following example.

Supplier “S” delivers the goods to recipient “R” on instruction of third person “T”.

“S” is billing to “T” but shipping to “R”.

• It may be noted that this provision is creating a deeming fiction in case of first transactions, but it is silent in case of second transaction.

3. Where no movement of goods is involved

• Place of supply shall be the location of goods at the time of delivery to the recipient.

4. Assembled or installed goods at site

• Place of supply shall be place of such installation of assembly.

5. Supply on Board of a Conveyance (Aircraft / train/ vessel)

• Place of supply shall be the location at which such goods are taken on board.

Amit Mundhra FCA

The author is a Fellow member of Institute of Chartered Accountants of India. He can be reached at amit.mundhra@gmail.com. Mobile : 9 8 2 9 0 1 0 1 7 2

Disclaimer: The views express here in above are based on author’s interpretation of law, which may differ from case to case and person to person. Views expressed above are neither intended nor liable to be used as professional advice or a legal opinion in any manner. The author or publisher is not responsible for the result of any action taken on the basis of this work or for any error or omission to any person.