The place of supply in Goods and Services Tax (GST) determines where a supply is deemed to occur for tax purposes and whether CGST + SGST/UTGST or IGST is applicable.
It factors in the intra-state or inter-state supply of goods and which kind of GST applies. Place of supply in GST for services helps with invoicing, Input Tax Credit (ITC), and enhanced GST compliance. This article covers the place of supply meaning in a clear and easy-to-understand way, explains the place of supply under GST, and explains how companies may know when to consider the appropriate location in different situations.
What Is the Place of Supply in GST?
GST is a destination-based tax; therefore, tax is paid at the place of consumption of goods or services and not the place of origin. This makes the place of supply in GST important for businesses operating within and between different States, including those involved in cross-border supply under GST. In GST, the place of supply means the location where a supply is considered to have occurred for tax reasons. It may determine whether a transaction is considered intrastate or interstate. It also informs taxpayers about whether CGST, SGST, or IGST may apply.
Sections 10, 11, 12 and 13 of the IGST Act set out the basic rules for determining the place of supply for goods and services, including imports and exports.
- Section 10 deals with the place of supply under GST for domestic supplies (other than goods imported into or exported from India).
- Section 11 deals with the place of supply of goods imported into or exported from India.
- Section 12 lays down the place of supply rules for services where both the supplier and the recipient are in India, including the general rule based on the recipient’s location.
For example, if a seller in Maharashtra ships goods to a buyer in Karnataka, according to Section 10, the place of supply is the location of the recipient; if registered, this is the registered place of business.
On the other hand, if a consultant in Delhi provides an online consultation to a client in Gujarat, Section 12 determines the place of supply for those services based on the registered GST location of the recipient.
- Section 13 covers place of supply of services where either the supplier or the recipient is outside India.
Importance of Place of Supply in GST
The place of supply is crucial in GST since it affects four important categories.
- Tax Type Selection: Businesses may need IGST applicability or a combination of CGST and SGST.
- State Revenue Allocation: GST follows destination-based taxation, hence consumption location is important. Businesses trying to understand GST classification may also explore how direct and indirect taxes work.
- Compliance: The correct place of supply determines GST invoice requirements, filing, and reporting.
- Input tax credit (ITC): ITC claims may be dependent on the correct supplier location in GST.
An incorrect classification may result in penalties or a ban on ITC. A clear knowledge leads to cleaner audit trails and improved GST compliance.
Related Reading: If you want a clearer understanding of how GST fits into the overall tax structure, explore our guide “What are Direct and Indirect Taxes as a Business Owner?”
How to Determine the Place of Supply?
Businesses can use the GST laws to figure out the place of supply. The regulations differ between commodities and services. It differs for both domestic and cross-border supply under GST. For example, a seller in Tamil Nadu sending goods to a buyer in Kerala follows the domestic place of supply rules, while an exporter in Gujarat shipping machinery to Singapore follows the cross-border place of supply rules. The sections that follow provide a simplified explanation of these concepts.
Place of Supply Under GST for Goods
The place of supply of goods for GST purposes is generally determined by where the goods are delivered. Section 10 of the IGST Act provides specific guidelines. Here are the main cases:
1. Moving goods from one location to another
When a supplier supplies goods to a recipient, the place of supply is the location where the movement of goods terminates for delivery to the recipient.
Example:
A supplier from Maharashtra may ship machinery to a consumer in Karnataka. Karnataka may be the place of supply. Because this is an interstate transaction, IGST may be applicable.
2. When there is no movement of goods
Sometimes products don't move. In such circumstances, the point of supply is often the site where the items are available or delivered.
Example:
A buyer collects products directly from a warehouse. The warehouse site may be the place of supply.
3. When goods are installed or assembled
For things that are installed or built on-site, the installation location is often the point of supply.
4. Goods supplied on a conveyor
For goods supplied on board a conveyance (such as a vessel, aircraft, train, or motor vehicle), the place of supply is the location where the goods are taken on board the conveyance.
Place of Supply for GST Services
Section 12 normally establishes the place of supply of services under GST. These guidelines also serve to categorise supply type classification and jurisdiction.
General rules for services
If both the supplier and the recipient are in India, the general rule is that the place of supply is the location of the recipient if registered, or the address on record; if that is not available, the supplier’s location.
Special Scenarios
1. Services related to immovable property
The property's location is generally the source of supply.
2. Restaurant and Catering Services
The place of supply is where the service is really provided.
3. Training and Admission Services
- For admission to events and organisation of events or training, the place of supply depends on whether the recipient is registered and where the event actually takes place, as per Section 12.
4. Transportation Services
- For goods transportation, the recipient's location is often used.
- For passenger transport, the location where the passenger embarks is frequently considered.
5. Telecom and Online Services
The recipient's location normally applies. Usage-based rules could also be useful.
Intra-State vs Inter-State Supply
The classification of a supply as intra-state or inter-state depends on the locations of the supplier and the place of supply.
GST Location of Supplier And the Recipient
The GST law considers the supplier's registered place of business to determine their location. Similarly, the GST location of the recipient determines where the service is considered consumed and which tax applies. This identification facilitates supply classification, ITC calculation, and invoice creation.
Cross-Border Supply Under the GST
The restrictions alter when Indian vendors serve international customers and vice versa. The rules for export and import under GST are:
Exports of goods and services
Exports are usually treated as zero-rated inter-State supplies. A supplier may export on payment of IGST and claim refund, or export under a Letter of Undertaking (LUT) without payment of IGST and claim refund of accumulated ITC.
Import of Goods and Services
Imports may attract IGST. Goods are also subject to customs duties. If services are imported, the recipient may be required to pay taxes using the reverse charge mechanism.
Types of Supply Location in GST and Classification
According to the GST place of supply rules, businesses usually confront the following sorts of places of supply:
- Place of supply for items that move: It is often the location where the goods are delivered once they have been moved.
- Place of supply of services under GST for goods that do not move: It is the location where goods are available at the time of delivery.
- Place of delivery of services where general principles apply: It is usually the location of the service recipient or, if unavailable, the service provider.
- Special category services relating to property, events, or transportation: These follow GST rules based on the location of the property, event venue, or transportation start/end point.
- Cross-border point of supply: It is determined whether the service recipient is located in or outside of India, in accordance with export/import GST guidelines
- Supply inside the taxable territory in GST: GST applies when the supply takes place within India's taxable jurisdiction.
- Supply outside the taxable territory: GST does not apply to supplies made outside of India's taxable jurisdiction.
This classification helps in the determination of supply jurisdiction while also reducing compliance errors. Businesses working with a large supplier network across states may also explore vendor financing to manage cash flow requirements.
Related Reading: If your business manages vendors across multiple states, you may also find value in “Vendor Financing: What It Is and How It Works?” which explains how this financing model supports smoother supplier payments and cash flow.
How GST Decides the Place of Supply
Compliance Requirements Related to Place of Supply
Businesses must clearly mention the required place of supply details on the invoice itself, or through other supporting documents, to clearly state:
- Supplier's location
- Place of supply rules under GST
- Recipient's tax registration number (GSTIN)
- Tax type applied
- Identifying these obligations may help with reconciliation and ease of audit.
- GST state registration
Place of Supply in GST: Key Takeaways
If a business operates across multiple locations, it may need to register for GST in each each State/UT from where it makes taxable supplies. Knowing your correct place of supply will allow you to decide where you need to register. Consider Shriram Finance for quick business loan options and easy documentation. Visit our website and start your application process today.
FAQs
What is the importance of the place of supply for GST?
It may assist with identifying the tax kind, promote state-level revenue allocation, and direct compliance.
How many types of supply points are there?
There may be numerous sorts, including supply with or without movement, location-based services, and cross-border transactions.
How does GST treat the transfer of stock between your own business locations?
If branches have separate GST registrations as distinct persons, transfers between them are treated as supplies. IGST applies when they are in different States; CGST and SGST/UTGST may apply when they are in the same State.
What is Section 11 of the Place of Supply in GST?
Section 11 addresses the place of supply for commodities imported into or exported from India.
Does the Place of Supply impact GST registration state-wise requirements?
Yes, understanding what "place of supply" means might help a business evaluate whether it needs to get extra state registrations.