Place of Supply in GST

by Bikash Chowdhury

1 min read

What is Place of Supply

Place of Supply, place of delivery or goods or consumption of service. In other words, it is the registered location of recipient of a good or service.

 

Why is Place of Supply important

Good and Service Tax (GST) is a destination based tax. This means that the rate of applicable GST is determined by the place of supply. There are 3 kinds of GST, namely CGST, IGST and SGCT. Depending on the place of supply, a sale of good or service will attract IGST or a combination of CGST and SGST.

  • Central Goods and Services Tax or CGST is the component of GST that is collected by the central government on sales of goods and services. It replaces the taxes levied by the central government in the past.
  • Integrated Goods and Services Tax or IGST is the GST applicable on sale of movement of goods and services between two states. It is uniform across all states and the revenue from this tax will be split between the central government and the state of supply.
  • State Goods and Services Tax or SGST is the state’s component of tax on movement or sales of goods and services within a state. This tax replaces the earlier taxes levied by various state governments on sale of goods.

 

How does Place of Supply determine GST

There are 2 locations – location of supplier and place of supply that are needed to determine GST.

  1. If the location of supplier and place of supply is in the same state, then it is an intra-state transaction and a combination of CGST and SGCT will be applicable.
  2. If the location of supplier and place of supply is in two different states, then is an interstate transaction and IGST will be applicable.
  3. In case the buyer (export) or supplier (import) is a foreign entity, then the transaction is treated as an interstate transaction and IGST will be applicable.
  4. Transfer of stock between two branches of a business that are located in two different states, is deemed as an inter-state transaction and IGST will be applicable. Transfer of stock between two branches of a business located in the same state will not attract GST.

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