Two fundamental locations help identify tax transaction liability under GST. These are the location and place of supply of the supplier.
The location of the supplier is important because it tells the location of the registered business of the seller, or it can be any place from where the goods are supposed to be dispatched. However, the place of supply is the buyer’s registered location of his business, where the goods or services are received.
It’s the location that helps the buyers understand where the transactions are to be made. If either of them is intrastate, it means that the exchange of goods or services is within the state. If it’s interstate, the buyers’ and suppliers’ locations will differ.
When both the buyer and the seller belong to a foreign party, the transaction is considered an import or an export.
Let’s get to know some of the recent changes and updates that took place concerning the rules of export and their impact.
Key amendments and updates to place of supply rules for exports
The new rules concerning the place of supply for exports say:
- When it occurs for a business, the place of supply will be where the recipient of the goods has its actual seat.
- When it occurs for a consumer, the place of supply will be where the recipient of the supplier has its actual seat.
- The supplier has the right to send goods through e-commerce operators.
It’s important to cater to new rules and laws set for business export because modifications can lead to better results. The amendments and updates to the place of supply for exports are effective in the new year, with the hope that they will help overcome shortcomings in the previous rules and laws set by the governing bodies.
Also Read: What are the different rules that apply to the place of supply of goods?
Impact of recent changes on export compliance
The latest Exim policy instructs about the recent laws and regulations about importing and exporting goods and services. The policy is renewed every five years. The objectives of the latest policy included:
- Increased growth in exports and imports
- There should be proper access to various components, commodities, raw materials, and goods
- The creation of new employment plans should be inculcated
- Supply of high-end products
- Improvement in the sector of technological productivity and agriculture
- Supply of goods and services to consumers at competitive rates.
The importance of new changes in export compliance
- It’s important to increase the economic flow of activities
- It helps in expansion of the market opportunities
- It helps in inculcating free trade and liberalization
- It helps in providing goods and services at economic rates
Benefits of export compliance
- Helps in promoting international trade
- It helps in improving the payment balance
- It helps create employment opportunities
- Helps in increasing foreign investment value
- Helps make the commodities available at low costs
- Helps inculcate liberalization policy
- Helps in increasing foreign investment values
Also Read: Understanding Place of Supply: Import, Export, and Compliance
Understanding the implications of the new Place of Supply Rules
Following are the new rules for place of supply that adhere to them:
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Goods that are not dispatched or transported
For this rule, it is decided that the place of supply is any place where the goods are physically present at the time when they are about to be supplied.
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Goods that need installation or assembly
In this case, the place of supply will be any place where the goods must be installed or assembled.
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Supplies on board vessels, aircraft, and trains
In this case, the place of supply will be any place where the transport begins. No matter the mode of transport, it can be via any vessel, aircraft, or train.
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Supply of electricity and natural gas
When it’s a matter of the supply of gas or electricity, the place of supply will be any place where the dealer has set up business.
When the case is different in such a way that the supply is needed by a customer, the place of supply will be where the customer has to use gas and electricity.
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Distant sales
The goods will be sold when they are being delivered or transported. The goods will have to be delivered if they are received via mail order sales, ordered through the Internet, through retail sales, or via a supplier who is responsible for transporting goods.
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Goods that are dispatched or transported
In such a case, the place of supply will be considered the place where the goods are available at the time of the supply.
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Imports
When goods or services are imported, the place of supply will be the place where the goods are being received.
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Exports
When goods or services are exported, the place of supply will be where the goods are dispatched.
Adapting export operations to the evolving regulatory landscape
It’s very important to adapt when you step into the industry of imports and exports. Once your business adapts to the changes in the industry, it will help you reshape your business for the better.
The geographical shifts, demands of the market, and technological advancements are a few factors you should keep in mind, as they are those factors that may want you to adapt to the industry and its norms.
Digitalization
Since the pandemic, small businesses of every size have been affected and later shifted to an e-commerce network. Adapting to the digital era and evolving your business accordingly is very important because it’s a necessity now.
It also reflects transparency between the two parties. It’s very important to inculcate all these tools and software that help save time and keep you in the digital limelight.
Sustainable practices
It’s very impressive to know if you are following practices leading towards the sustainability of the environment. Sustainable businesses reflect the fact that businessmen are taking their businesses concerning the environment.
Multiple businesses are least bothered by the fact that their businesses could be better for the ecosystem, but they still do it for their profitability.
It’s important to remember that import and export businesses are responsible for improving the ecosystem. Along with them are the business owners, who are responsible for the fact that they should come up with eco-friendly business ideas.
Ensuring ongoing compliance with place-of-supply rules
The place of supply holds huge attention and importance as it determines the tax category to be levied upon those goods and services being exported. IGST, SGST, or CGST apply to goods and services, but that also depends on the place of supply.
A great compliance network should have these features instilled. These are:
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Automatic document checks
While the import and export processes can’t be handled manually, it’s nearly impossible to document everything manually too.
When your company has a good export compliance system, it can perform tasks in an automated way, and the results, checks, and balances can be presented in the blink of an eye. Automation is the key.
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Determine the context of a compliance check
Your company should be able to check the context of a specific compliance. You can have information regarding which countries are involved in the transport process, or you would also have to follow those rules if you export to that particular country or not.
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Sanctions and blacklist checks
Some countries have embargoes and sanctions in place, meaning you may need help shipping your goods there. Apart from this, other various countries are, for some reason, blacklisted as well.
You are not allowed to trade with them. If your compliance framework excels, it will help you identify those countries promptly.
Also Read: What Are The Different Rules That Apply To The Place Of Supply In The Case Of Bill To / Ship To?
Conclusion
Determining the place of supply plays a pivotal role in catering to the tax process. Under the laws and regulations of GST, it’s important to know the place of supply for exports.
The recent updates and rules set for exports will be a helping tool in getting through the process smoothly. It’s true that the process of imports and exports is not easy and comes with its risks and problems, but with the inculcation of new tools and software and with the help of atomization, things can work a lot better and can be time-saving as well.
FAQs
Q1. What changes the value of exports?
When the value of a currency is changed, everything else changes. When the goods are expensive, the currency appreciates, and similarly, when the goods are sold inexpensively, the currency depreciates.
Q2. What factors will cause a change in net exports?
The key players in the export economy are domestic and foreign incomes, trade policies, exchange currency rates, pricing, and technology. The pricing and quotation can cause an overall change in the net exports.
Q3. Who benefits from exports?
No matter how big or small the business is, exports can benefit each business. Exports help with increased sales; there are more jobs on the portal for unemployed people, and the average earnings of the employees are higher than usual.
Every business is greatly impacted by exports. Exports of goods can change the whole perspective of the economy and can help lead to a successful business plan.
Q4. What is the export market strategy?
It’s a complete plan of exporting goods and services to which country; the pricing and quotation, the markets to sell in, and the export mode are all decided in this strategy plan.
It’s important to know these things beforehand because once you enter this field with less knowledge, you may be mocked or cheated. Learning should never be stopped.
Q5. What is export diversification?
To increase foreign exchange earnings and profits, the category of products for exports is increased, and eliminating the factor of depending on any one product for exports is called export diversification.
In short, not staying on one product but moving on to various types and categories of products so that you may offer various ideas to buyers worldwide can be considered export diversification.
Q6. What are the five reasons for international trade?
International trade happens for multiple reasons, but the five major ones are:
- Difference in demand
- Technology difference
- Resource endowment difference
- Government policies
- Economies of scale
Due to the presence of these factors, international trade occurs between countries.
Q7. What does free trade mean?
The trade of inexpensive import and export of goods and services needs allowance. Free trade means these goods and services are allowed to be traded at low tariffs so that there can be more currency exchanges between the countries. It removes the barrier between countries to import and export.
Q8. What does globalization mean?
Globalization is any term that defines the usage of ideas, information, rules, knowledge, goods, and services worldwide.
This term is a convergence of culture and economy. The more a country is influenced toward its betterment in terms of culture, politics, and economy, the more globalized it appears in front of the world.
Q9. What are the three types of globalization?
There are three types of globalization. These are:
- Economic globalization: The main focus of this type of globalization is the integration of financial markets and the coordination of financial exchange.
- Political globalization: This globalization category brings unity within the countries. It also works for the countries’ political, cultural, and economic growth and prosperity.
- Cultural globalization: The key factors to focus on in this category are technology and society. It’s because these two factors greatly impact cultures and converge.
Especially in the process of imports and exports, globalization can be considered an important tool for cross-checking ideas and information.
The exchange of these ideas and information between two countries can help create a positive global image. It also helps exchange currencies between two countries, which can also be a source of profit.
Q10. What is the export policy?
It is a collection of guides, instructions, and rules that govern the import and export sectors of goods and services. In that, a government dictates where, whom, when, what, and how a specific country will do the export. It details the tariffs, customs, and any limitations that exist to trade with a specific country, it’ll have export rules to process a request, and it also explains from the process whether a particular client is allowed or denied along with the degree of access given to carry it. There can be a certain period of two, three, four, or five years to announce the policy instructing its rules.
