Understanding place of supply

From Editor’s Desk: Understanding Place of Supply

About the Author
Swapnil Gorde
Domain Expert, GST
Swapnil is a tax expert having expertise in direct and indirect taxation for over 15 years. He has been speaking at ICAI conferences on E-governance and has post qualification expertise of more than 20 years. Currently, he is working with
numberz as GST consultant.

To understand the Place of Supply under GST, let us first understand Taxable Event of tax. It is important to know the taxable event under any law because it is the activity which attracts the tax levy. This enables the reader to know when he is liable to pay tax under various law concerned.

So, let us first understand various taxable events in the present tax structure.

Taxable events under current structure

 

From above, you can make out that, for different, laws there are different taxable events and that makes it complicated for the user to understand the law and their implication on his business.

Now under proposed GST structure, there is only one taxable event i.e. Supply of Goods or Services. It is very important, therefore, to understand the place of supply in determining the right charge of tax on supply. The model GST Law lays down the criteria to determine the place of supply. Based on these criteria, you can treat the supply of goods or services as either Intra-State (within the State) or Inter-State (Outside the State).

The location of Goods supplied or Service provider will decide which tax to levy. Based on place of supply, one will able to determine whether to charge CGST & SGST or IGST. So, it is very important for dealers to identify the place of supply.

There are two important components which determine the which tax to be charged for.

  1. Location of Supplier: Registered Place of Business
  2. Place of Supply: It is registered place of business of recipient.

Let’s now understand how a place of supply will change the taxability under GST with some examples.

M/s Alert Car Accessories & Components Pvt. Ltd., having registered office in Mumbai, Maharashtra, had supplied spare parts to M/s True Value Car Services Pvt. Ltd. has registered place of business in, Pune, Maharashtra.

 

Let’s now consider another Scenario. M/s Alert Car Accessories & Components Pvt. Ltd., having registered office in Mumbai, Maharashtra, had supplied spare parts to M/s True Value Car Services Pvt. Ltd. Having registered place of business in, Hyderabad, Telangana State.

 

Apart from the above example following are also treated as Inter State Supply under GST

  1. Import of goods or services
  2. Export of goods or services
  3. Supply of goods or services to or by a SEZ developer or SEZ unit, even if the supply is within the state.

Section 70 under Model GST Act, make it necessary for the Taxpayer to collect the right amount of Tax. If assessee fails to deduct correct tax, then there will be the penalty which needs to be paid by dealers. The dealer must prove that the place of delivery mentioned is correct, so considering this, a dealer needs to maintain such records of the place of delivery which enables the GST officer to verify the place of supply. Failing which dealer will be liable to pay tax as determined by the GST officer.

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