Frequently asked Questions

Place of Supply of Goods and Service

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 determines 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 or
services is required to determine whether a supply is subject
to SGST plus CGST in a given State or union territory 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 locations 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 B2B 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 10 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 10 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
10 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 12 and Section 13 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 or agreement, on such other reasonable
basis as may be prescribed in this behalf. (The Explanation
clause to section 12(3) of the IGST Act, for domestic
supplies)

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
12(7) of the IGST Act)

Q 12. What will be the place of supply of goods services by way of transportation of goods, including mail or courier?

Ans. In case of domestic supply: If 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 (section 12 of the IGST Act).

For international supplies: The place of supply of transport
services, other than the courier services, shall be the
destination of goods. For courier, the place of supply of
services is where goods are handed over to courier.
However, if the courier services are performed even
partially in India, the place of supply shall be deemed as
India (section 13(3),13(6) and 13(9) of the IGST Act).

Q 13. What will be the place of supply of passenger transportation service, 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 12(9) 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 12(9)
of the IGST Act)

Q 15. What will be the place of supply for mobile connection? Can it be the location of supplier?

Ans. For domestic supplies: 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.

For international supplies: The place of supply of telecom
services is the location of the recipient 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 12(13) of the IGST Act)