Place of Supply and Taxation in Goods Transactions: GST Rates and Compliance Obligations

Home » Blogs » Place of Supply and Taxation in Goods Transactions: GST Rates and Compliance Obligations
captainbiz place of supply and taxation in goods transactions gst rates and compliance obligations

Table of Contents

Introduction

Taxes can be a tricky business, but the Goods and Services Tax (GST) has tried to make things easier in India. One big puzzle piece in this tax world is the “Place of Supply.” It’s like a map that decides where you pay your taxes and how much. Figuring out this map and following the rules is super important for businesses.

In this blog, we’re here to guide you through the twists and turns of GST, especially when it comes to buying and selling goods. We’ll break down the different GST rates that apply to different things you might be buying or selling. And we’ll make sense of the rules you need to follow to stay on the right side of the law.

Whether you’re dealing with stuff within your state or sending things across state borders, we’ve got you covered. Our goal is to make this whole GST thing less confusing. So, get ready to explore with us as we uncover the secrets of Place of Supply, GST rates, and the rules you need to know. Stick around, and we’ll make taxes a bit less daunting!

So, let’s move on to understand more about the Place of Supply under GST.

GST Rates and Goods Transaction Place

GST payment and goods transactions are interrelated. So, the GST applicable on the goods and services you sell will depend on where the final recipient is located. 

So, let’s take an example to understand this concept in detail. Let’s say you run a business of selling electronics items. Now, you are based out of Pune, and you received an order to deliver 20 vacuum cleaners to a hotel chain in Mumbai. In this case, you have to file SGST and CGST on your total order value.

On the other hand, if you have received this order to deliver these vacuum cleaners to a hotel in Chennai, then you are liable to file IGST.

Also Read: Understanding Place of Supply in GST: Key Principles & Implications

Compliance in Goods Taxation Location

With the GST rates depending on the transaction place of the goods out of the way, let’s focus on how the Place of Supply is determined in each case –

Place of supply in case the goods are on the move

Nature of supplyPlace of Supply
Movement of goods by the supplier, buyer, or anyone elseLast location of the good where it is delivered to the recipient
When a seller sends the goods to a buyer on the direction of a third-party and before or during the movement of the goods the ownership gets transferredThe place of business of the third party as it is assumed that the third party has received the goods

Place of supply in case there are no movement of goods

Nature of supplyPlace of Supply
If neither the seller or the buyers moves the goodsLocation of the goods at the time of deliver to the recipient (during ownership transfer)
Goods are assembled Place of installation 

Place of supply in case the goods are supplied on a vessel or conveyance

Nature of supplyPlace of Supply
Goods are onboard of a vessel, conveyance, train, or vehicleLocation at which the goods have been boarded

Place of supply in case of import and export

Nature of supplyPlace of Supply
Imported goodsLocation of the importer and IGST is applicable
Export goodsLocation outside India and GST is refundable on such transactions

Additionally, when you generate an invoice in foreign currency, you can charge GST in that currency. However, you need to display the INR conversion and values.

Also Read: Understanding Place Of Supply: Import, Export, And Compliance

Goods Transaction Taxation Rules

With the discussion on how the place of supply is determined in each case of goods transaction, let’s understand the taxation on this matter –

In case the goods are on the move, then there are a few cases that one needs to consider to determine the GST.

  • If the goods are moved within a state, which is an intra-state transaction, it will attract only CGST and SGST.
  • But, if the goods are delivered to another state, then the place of supply will be the recipient’s address in the other state, and IGST will be levied accordingly.
  • Now, if a third party is involved in this transaction and resides in another state, then the third party’s address will be considered as the place of supply, and IGST will be implemented.
  • If the recipient decides to pick up the order from the factory and arrange transportation, then the place of supply will be the recipient’s address, as the movement of goods will be terminated there. So, based on that, IGST will be levied for inter-state transactions.

Now, in case there is no movement of goods, then you also need to consider a few points to levy GST –

  • In case the goods are not on the move, then CGST and SGST will be charged as it will be an intra-state transaction.
  • On the other hand, if a company is to build and install anything at the recipient’s address, then the place of supply will be the installation site. Hence, CGST and SGST will be imposed.

If the goods are being transported on a vessel or conveyance, then taxation will be –

  • In the case of such cases, the GST is charged depending on the state from where the goods are loaded. So, CGST and SGST are applicable.
  • And, in case the goods are onboarded from any union territory, then UTGST and CGST will be applicable.

Apart from these, as previously mentioned, imports are classified under IGST and all exported goods are exempted from GST.

Place of Supply and GST Rates

Hopefully, you have the required clarity on how the place of supply determines the GST and its application. So, let’s move on to understand each concept of GST in detail.

SGST

SGST stands for State Goods and Services Tax, and as per the GST provisions, it is only applicable during intrastate transactions. The tax collected as SGST is later paid back to the respective State Government by the Central Government.

Moreover, the collection and regulations of SGST are governed by the respective state’s SGST Act, 2017. Moreover, this act receives amendments from time to time. 

CGST

CGST stands for Central Goods and Services Tax. Like the SGST, CGST is also applicable on intrastate transactions. In this case, the collection and governance of this tax are managed by the central government as a part of the GST regulations of 2017. Moreover, CGST also receives the required amendments from time to time.

Before moving on to the last portion of GST, i.e. IGST, it is important to note that equal CGST and SGST are applicable to all the goods and services sold within the state. 

IGST

IGST stands for Integrated Goods and Services Tax, and it is only applicable to inter-state transactions. Now, the collection and governance of IGST is done under the IGST Act of 2017, which also receives timely amendments.

Now, a point to remember about IGST is that the tax collected through IGST is shared between the central and state governments. Also, exports and imports also come under the purview of IGST.

For instance, if Mr A of Bihar sold goods worth Rs.1 lakh to Mr B in Assam, a GST of 18% is applicable to it. In this case, Mr A will have a tax liability of Rs.18,000. Now, the Central Government will collect this tax, and later, it will be split.

Also Read: Place Of Supply In GST For Goods Exports: Shipping Destination And Customs Clearance

GST Compliance in Goods Transactions

Fulfilling GST compliance is important and must be met without fail to ensure you are standing on the right side of the law and avoid any repercussions. Here are some highlighting points that can help you in this journey –

Registration

The first point to remember under GST compliance is to register on time and without fail. Whether you are a business or an individual, once you perform goods transactions over a specific limit, you must register for GST and get your GSTIN.

Submitting returns

Following registration, you need to submit timely returns. For this, you can use different forms like GSTR-1 (details of outward supplies), GSTR-2 (details of inward supplies), GSTR-3 (final monthly return), etc.

Tax payment

Besides submitting the returns, you also need to pay the taxes on time. This includes SGST, CGST and IGST.

Keeping records

Now, to complete the GST payment smoothly and avoid future problems, you need to keep records and update them periodically.

Generating invoices

A crucial part of GST compliance is generating the right invoices. Moreover, these invoices must include the supplier and recipient’s GSTIN, the taxable value of the product and service, the applicable GST rate, and other crucial details.

Generating E-way bill

If you are dealing with a high-value product, generating an E-way bill through the GST portal is essential.

Input tax credit

As a taxpayer, you have the right to claim an input tax credit against your GST payment on different transactions.

Compliance rating

The Government of India plans to introduce a GST compliance rating system. The idea here is to ensure that businesses comply with the GST law.

Parting words

In conclusion, understanding the intricate dance between the place of supply and GST is crucial for businesses navigating the realm of taxation. By now, you should have a clear picture of how these two elements are interconnected. Whether you’re in the business of selling goods or services, accuracy in identifying the Place of Supply (POS) is paramount when filing your returns. This not only ensures a smooth GST filing process but also keeps you in good standing with the regulatory obligations.

For those businesses that take the time to grasp the finer nuances of this concept, there’s a silver lining – a more streamlined and efficient taxation journey. The devil is indeed in the details, and businesses that pay attention to the minutiae of the place of supply can find themselves reaping the benefits of a well-oiled taxation process.

However, it’s crucial to underscore the gravity of non-compliance. Failing to pay GST comes with serious repercussions, including financial penalties and the looming threat of prosecution. Therefore, as you navigate the intricate web of GST rates and compliance obligations, remember that diligence and accuracy are your allies. So, whether you’re a seasoned player or a newcomer to the GST arena, ensuring compliance remains your key to a successful and stress-free taxation experience.

FAQs

  • What are the applicable GST slabs in India?

The collection of GST in India is essentially distributed in 4 slabs: 5%, 12%, 18%, and 28%. However, there are some goods and services that do not incur any GST, which means 0% or nil rate GST.

  • Who administers the implementation and collection of GST in India?

The GST Council of India, which has representatives of the central and state governments, is in charge of administering this taxation system and making necessary changes.

  • What is the process of filing GST in India?

You can file a GST return online using the GSTN (Goods and Services Tax Network) portal. Once registered, you need to find the relevant form and submit your return.

  • What is the Composition Scheme under GST?

The composition scheme under GST is designed to help small businesses whose turnover is below Rs.1.5 crore; for Himachal Pradesh and North-Eastern States, it is Rs.75 lakh. The objective of this scheme is to simplify the taxation and compliance.

  • Is it possible to claim GST under the composition scheme?

No, it is not possible to claim GST under the composition scheme.

  • Is GST applicable for all goods and services?

Yes, GST applies to almost every good and service except a few essential commodities and services.

  • How does GST work?

In simple words, GST is a destination-based taxation system, and it is levied at each step of the production and distribution chain. The idea here is to make it a consumption-based tax, which the end consumer bears.

  • When should one file GST?

One can file GST anytime he/she wants. But, the most popular practice is to file it either monthly, quarterly, or annually.

  • Are imports and exports subject to GST under the new taxation system?

The imports are subject to GST (IGST), but exports are free from any GST obligations.

  • Should an individual file a GST return?

Yes, if the person sells goods and services above a certain threshold in a year, is rightfully registered under GST, and has a GSTIN number must pay the taxes on time.

author avatar
Anushka Mukherjee Digital Marketing Manager
I'm a firm believer in the transformative power of hard work and continuous learning. With a deep commitment to delivering quality, every word I choose carries weight. As your dedicated storyteller, content confidante, and skilled copywriter, I've turned my personal passion for writing into a journey of guiding diverse brands towards revenue generation. My approach involves comprehensive research to uncover the "how" and "why" of your business, laying the foundation for meticulously curated rich content. Over 6+ years of invaluable experience have honed my ability to consistently produce captivating, extensively researched, and immersive content that makes a lasting impact.

Leave a Reply