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Understanding the Location for Goods Supply Under GST

This article clarifies the concept of place of supply for goods under GST, a critical factor for determining tax jurisdiction and type (CGST, SGST, IGST). It details scenarios for goods involving movement, goods without movement, and goods supplied on conveyances. Furthermore, the guide explains the rules for imports and exports, providing practical examples for each situation to illustrate GST application in various supply chains.

📖 3 min read read🏷️ Place of Supply of Goods

The Goods and Services Tax (GST) operates as a destination-based tax, meaning that taxes on goods or services are collected at the point of consumption rather than at their origin. Consequently, the state where consumption occurs is entitled to receive the GST. Determining the place of supply is therefore fundamental within the GST framework, as it influences various GST regulations. For goods, the place of supply dictates whether a transaction is considered intrastate or interstate, which in turn determines the application of SGST, CGST & IGST.

Place of Supply for Goods in Motion

When goods are in transit, their place of supply is defined by specific criteria:

Supply TypePlace of Supply
Movement of goods by supplier, buyer, or any other partyThe location where the movement of goods concludes for delivery to the recipient.
Goods delivered to the buyer by the seller under a third party's instruction (e.g., through title transfer)The deemed place of supply is the primary business location of that third party, as they are considered to have received the goods.

Example 1: Intra-state Transaction

If Mr. Raj in Mumbai, Maharashtra, sells 10 television sets to Mr. Vijay in Nagpur, Maharashtra, the place of supply is Nagpur, Maharashtra. Since both locations are within the same state, CGST and SGST will be applicable.

Example 2: Inter-state Transaction

When Mr. Raj from Mumbai, Maharashtra, sells 30 television sets to Mr. Vinod in Bangalore, Karnataka, Bangalore, Karnataka, is the place of supply. As this involves different states, IGST will be applied.

Example 3: Delivery to a Third Party by Instruction

Consider Anand in Lucknow who purchases goods from Mr. Raj in Mumbai, Maharashtra. Anand instructs Mr. Raj to send the goods to Nagpur, Maharashtra. In this scenario, Anand in Lucknow is presumed to have received the goods, making Lucknow (Uttar Pradesh) the place of supply, and IGST will be levied.

Example 4: Recipient Collects Goods Ex-Factory

Sales Heaven Ltd., based in Chennai, Tamil Nadu, orders 100 television sets from Mr. Raj in Mumbai, Maharashtra, and arranges its own transport to collect them directly from Mr. Raj's factory. Even though the goods are collected ex-factory in Maharashtra, their movement concludes for delivery in Chennai, Tamil Nadu. Therefore, Chennai, Tamil Nadu, is the place of supply, and IGST is applicable, regardless of who undertakes the physical movement of goods.

Example 5: E-commerce Transaction

Mr. Raj in Mumbai, Maharashtra, orders a mobile phone from Amazon to be delivered as a gift to his mother in Lucknow, Uttar Pradesh. M/s ABC, an online seller registered in Gujarat, processes and ships the order, with Amazon billing Mr. Raj. Similar to Example 3, Mr. Raj in Mumbai is deemed the recipient, making Mumbai, Maharashtra, the place of supply, and IGST will be charged.

Place of Supply for Goods Without Movement

When goods are supplied without physical movement, the place of supply is determined differently:

Supply TypePlace of Supply
No movement of goods by either supplier or recipientThe specific location of the goods when they are delivered to the recipient (i.e., when ownership transfers).
Goods requiring assembly or installation at a siteThe location where the installation or assembly takes place.

Example 1: No Goods Movement

Sales Heaven Ltd. (Chennai) establishes a new showroom in Bangalore, acquiring a building with pre-installed workstations from ABC Realtors (Bangalore). The place of supply is Bangalore. As there is no movement of the workstations, the supply location is where these goods are situated at the time of handover to the recipient. (Note: The purchase of a building itself is not subject to GST, but commercial rent is.)

Example 2: On-site Installation of Goods

Strong Iron & Steel Ltd. (Jharkhand) contracts M/s SAAS Constructions (West Bengal) to construct a blast furnace at its steel plant in Jharkhand. Despite M/s SAAS being based in West Bengal, the place of supply is Jharkhand because that is where the blast furnace is installed. (Note: M/s SAAS would typically need to register in Jharkhand for this contract, potentially as a casual taxable person for 90 days, with a possible extension.)

Table: Place of Supply for On-site Assembly/Installation

ParticularsLocation of SupplierLocation of Recipient (Registered Office)Site of Assembly/InstallationPlace of SupplyApplicable GST
Goods assembled or installed at siteWest BengalOrissaJharkhandJharkhandCGST+SGST (Jharkhand)
Goods assembled or installed at siteJharkhandJharkhandJharkhandJharkhandCGST+SGST (Jharkhand)
Goods assembled or installed at siteJharkhandJharkhandOrissaOrissaCGST+SGST (Orissa)
Goods assembled or installed at siteJharkhandJharkhandTamil NaduTamil NaduCGST+SGST (Tamil Nadu)
Goods assembled or installed at siteJharkhandTamil NaduJharkhandJharkhandCGST+SGST (Jharkhand)

Place of Supply for Goods on a Conveyance

For goods supplied on board a mode of transport, the place of supply is determined as follows:

Supply TypePlace of Supply
Goods supplied on a vessel, conveyance, train, aircraft, or motor vehicleThe point where these goods were initially loaded onto the conveyance.

Example 1: In-Flight Purchase (Same State Airline Registration)

Mr. Ajay flies from Mumbai to Delhi and buys coffee and snacks during the flight. If the airline is registered in both Mumbai and Delhi, the place of supply is Mumbai, as that is where the food items were loaded onto the aircraft. Consequently, CGST and SGST are charged.

Example 2: In-Flight Purchase (Business Travel)

Mr. Ajay travels from Mumbai to Chennai for his company, Ram Gopal and Sons (registered in Bangalore), and buys lunch on the plane. Even if the airline is registered in Mumbai and Chennai, the place of supply is Mumbai because the food was loaded there. The buyer's registration location is irrelevant here, and CGST and SGST are applied.

Example 3: On-Train Purchase

Mr. Vinod boards a train in Vadodara, Gujarat, en route to Mumbai. He buys lunch on board, which was loaded in Delhi, where the train journey began. The place of supply is Delhi because the food was loaded there. CGST and UTGST are charged. The buyer's registration state is not a factor, as Indian Railways typically has a pan-India presence, ensuring state registration.

If the place of supply cannot be definitively ascertained, Parliament's rules, formulated based on GST Council recommendations, will govern its determination.

Place of Supply for Imports and Exports

For international transactions, the place of supply for goods is defined as:

  • For goods imported into India: The importer's location.
  • For goods exported from India: A location outside India.

Table: Place of Supply for International Trade

Supply TypePlace of SupplyApplicable GST
Goods imported into IndiaImporter's locationAlways IGST for imports
Goods exported from IndiaLocation outside IndiaExports are eligible for GST refund

Furthermore, if an Indian entity issues an invoice in foreign currency, GST can also be charged in that foreign currency. However, the invoice must clearly state the INR conversion rate and the corresponding INR values.

Example 1: Import Scenario

Ms. Malini, whose shop is registered in Mumbai, imports school bags from China. The place of supply is Mumbai, and IGST is levied.

Example 2: Export Scenario

Ms. Anita, based in Kolkata, exports Indian perfumes to the UK. The place of supply is the UK, and GST on this export is exempted.

Further Reading

Frequently Asked Questions

What is the fundamental principle behind GST being a destination-based tax?
GST functions as a destination-based tax, which means that the tax revenue is allocated to the state or union territory where the goods or services are ultimately consumed, rather than where they originate. This ensures that the consuming state has the right to collect the tax.
How does the place of supply determine the type of GST (CGST, SGST, IGST) applicable to a transaction?
The place of supply is crucial because it classifies a transaction as either intrastate (within the same state/union territory) or interstate (between different states/union territories). Intrastate supplies attract CGST and SGST, while interstate supplies are subject to IGST.
What are the key differences in determining the place of supply for goods with and without movement?
For goods involving movement, the place of supply is the location where the movement ends for delivery. For goods without movement, it is the location of the goods at the time of delivery or transfer of ownership, or the site of installation/assembly if applicable.
Can GST be charged in foreign currency for international invoices in India, and what are the requirements?
Yes, an Indian entity can charge GST in foreign currency for invoices related to international trade. However, it is mandatory to also show the INR conversion rate and the equivalent invoice values in Indian Rupees on the same invoice.
Why is the place of supply important for businesses operating across multiple states in India?
For multi-state businesses, accurately determining the place of supply ensures correct GST levy, avoids legal non-compliance, helps in claiming appropriate input tax credit, and prevents issues during audits by tax authorities, thereby streamlining inter-state transactions.

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