Q 1. What is the need for the Place of Supply of Goods and Services under GST?
Ans. 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. 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.
Q 2. Why are place of supply provisions different in respect
of goods and services?
Ans. 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;
(iv) Sometime 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;
(v) 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.
Q 3. What proxies or assumptions in a transaction can be
used to determine the place of supply?
Ans. 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) 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
Q 4. What is the need to have separate rules for place of
supply in respect of B2B (supplies to registered persons) and B2C (supplies to unregistered
persons) transactions?
Ans. In respect of B2B transactions, the taxes paid are
taken as credit by the recipient so such transactions are just pass through.
GST collected on B2 B supplies effectively create a liability for the
government and an asset for the recipient of such supplies in as much as the
recipient is entitled to use the input tax credit for payment of future taxes.
For B2B transactions the location of recipient takes care in almost all
situations as further credit is to be taken by recipient. The recipient usually
further supplies to another customer. The supply is consumed only when a B2B
transaction is further converted into B2C transaction. In respect of B2C transactions,
the supply is finally consumed and the taxes paid actually come to the
government.
Q 5. What would be the place of supply where goods are
removed?
Ans. 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. (Section 5(2) of IGST Act)
Q 6. What will be the place of supply if the goods are delivered
by the supplier to a person on the direction of a third person?
Ans. 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. (Section 5(2A) of IGST Act)
Q 7. What will be the place of supply where the goods or
services are supplied on board a conveyance, such as a vessel, an aircraft, a
train or a motor vehicle?
Ans. In respect of goods, the place of supply shall be the location
at which such goods are taken on board. (Section 5(5) of IGST Act) However, in
respect of services, the place of supply shall be the location of the first
scheduled point of departure of that conveyance for the journey. (Section
6(11)of IGST Act)
Q 8. What is the default presumption for place of supply in
respect of B2B supply of services?
Ans. The terms used in the IGST Act are registered taxpayers
and non-registered taxpayers. The presumption in case of supplies to registered
person is the location of such person. Since the recipient is registered,
address of recipient is always there and the same can be taken as proxy for
place of supply.
Q 9. What is the default presumption for place of supply in
respect of unregistered recipients?
Ans. In respect of unregistered recipients, the usual place of
supply is location of recipient. However in many cases, the address of
recipient is not available, in such cases, location of the supplier of services
is taken as proxy for place of supply.
Q 10. The place of supply in relation to immovable property
is the location of immovable property. Suppose a road is constructed from Delhi
to Mumbai covering multiple states. What will be the place of supply?
Ans. Where the immovable property is located in more than
one State, the supply of service shall be treated as made in each of the States
in proportion to the value for services separately collected or determined, in
terms of the contract or agreement entered into in this regard or, in the
absence of such contract oragreement, on such other 238 reasonable basis as may
be prescribed in this behalf. (The Explanation clause to section 6(5) of the
IGST Act)
Q 11. What would be the place of supply of services provided
for organizing an event, say, IPL cricket series which is held in multiple
states?
Ans. In case of an event, if the recipient of service is registered,
the place of supply of services for organizing the event shall be the location
of such person. However, if the recipient is not registered, the place of supply
shall be the place where event is held. Since the event is being held in
multiple states and a consolidated amount is charges for such services, the
place of supply shall be taken as being in each state in proportion to the
value of services so provided in each state. (The Explanation clause to section
6(8) of the IGST Act)
Q 12. What will be the place of supply of goods in respect
of transport of goods by courier?
Ans. 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.
Q 13. What will be the place of supply if a person travels
from Mumbai to Delhi and back to Mumbai?
Ans. If the person is registered, the place of supply shall
be the location of recipient. If the person is not registered, the place of
supply for the forward journey from Mumbai to Delhi shall be Mumbai, the place
where he embarks. However, for the return journey, the place of supply shall be
Delhi as the return journey has to be treated as separate journey. (The
Explanation clause to section 6(11) of the IGST Act)
Q 14. Suppose a ticket/ pass for anywhere travel in India is
issued by M/s Air India to a person. What will be the place of supply?
Ans. In the above case, the place of embarkation will not be
available at the time of issue of invoice as the right to passage is for future
use. Accordingly, place of supply cannot be the place of embarkation. In such
cases, the default rule shall apply. (The proviso clause to section 6(10) (b)
of the IGST Act)
Q 15. What will be the place of supply for mobile connection?
Can it be the location of supplier?
Ans. The location of supplier of mobile services cannot be the
place of supply as the mobile companies are providing services in multiple
states and many of these services are inter-state. The consumption principle
will be broken if the location of supplier is taken as place of supply and all the
revenue may go to a few states where the suppliers are located. The place of
supply for mobile connection would depend on whether the connection is on
postpaid or prepaid basis. In case of postpaid connections, the place of supply
shall be the location of billing address of the recipient of service. In case
of pre-paid connections, the place of supply shall be the place where payment
for such connection is received or such pre-paid vouchers are sold. However if
the recharge is done through internet/e-payment, the location of recipient of service
on record shall be the taken as the place of service.
Q 16. A person in Goa buys shares from a broker in Delhi on
NSE (in Mumbai). What will be the place of supply?
Ans. The place of supply shall be the location of the recipient
of services on the records of the supplier of services. So Goa shall be the
place of supply.
Q 17. A person from Mumbai goes to Kullu-Manali and takes
some services from ICICI Bank in Manali. What will be the place of supply?
Ans. If the service is not linked to the account of person, place
of supply shall be Kullu i.e. the location of the supplier of services. However
if the service is linked to the account of the person, the place of supply
shall be Mumbai, the location of recipient on the records of the supplier.
Q 18. A person from Gurgaon travels by Air India flight from
Mumbai to Delhi and gets his travel insurance done in Mumbai. What will be the
place of supply?
Ans. The location of the recipient of services on the
records of the supplier of insurance services shall be the place of supply. So
Gurgaon shall be the place of supply. (Proviso clause to section 6(14) of the
IGST Act)