Understanding Place of Supply: Import, Export, and Compliance

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Published Date:  17-12-2023   Author:   amitha-shet
captainbiz understanding place of supply import export and compliance

Introduction

The place of supply holds great importance when it comes to exporting or importing goods. The commodities, goods, and services need a proper record through which they can be tracked.

When it comes to the place of supply of goods, the ones that are imported into India, the location has to be of the importer. The goods, commodities, or services that are exported from India, the location will be outside India.

Let’s get to know more about what information should be kept in mind while the services are being exported outside India and the location of the service recipient is outside of India too, the set of rules conditioned for such a scenario and other relevant information related to the context. 

Extraterritorial supply of services

The extraterritorial jurisdiction supply of services examines the condition in which it is practised to improve the transnational corporation that is domiciled for human rights abuse committed overseas. Extraterritoriality is increasing day by day over time. It’s a basic phenomenon where privilege is given to different beings where they reside and they practise the chances given to them beyond measure.

It’s important to know the nature of regulation whether it’s territorial or extraterritorial. It’s often mistaken hence it’s good if it’s corrected and understood prior. Extraterritorial jurisdiction can be utilised in business strategies for better use. It can make a difference in:

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  • Combating international crimes

It is a great way of combating international crimes. Some of them are either unidentified or remain hidden for a long run but with this process and regulations implemented, it has been found that things have fallen into place and have created a massive impact to combat international crimes.

  • Addressing transnational crimes

Transnational crimes can be identified as human trafficking, terrorism, pedophiles, sexual abuse, etc. To address these concerns, proper action and rules are set for the overseas residents especially because it’s important to address transnational crimes to maintain peace and prosperity. 

  • Exerting pressure on the host state

All such operations that are taking place in that one particular state are kept responsible for operating such operations. The actual pressure is exerted on the host state. This happens to control transnational crimes

  • Improving the ethics of globalisation

Another leading factor that is using extraterritorial jurisdiction is to rectify business behaviour for the betterment of economic globalisation. It’s also done to improve the organisation’s accountability. The extraterritorial jurisdiction has been playing a great role in the improvisation of the ethics of globalisation.

  • Extraterritorial jurisdiction as an unintended consequence

Many countries and foreign parties consider this act as an unintended consequence but in actuality it has been a great way of keeping things in a better way, making the terms better with the foreign policies and the relations seemed better after the implication of the extraterritorial jurisdiction.

When it comes to understanding the extraterritorial supply of service, the best way to explain the concept is any place where the service is provided and that place has to implement extraterritorial jurisdiction for better functionality, better results, and better outcomes.

Location of the service recipient

For a better understanding of what the location of the service recipient has to be, it’s clear and concise that the place of supply of the services would be the location of the recipient of the services except for the services.

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In another scenario, when the location of the service recipient is not available in the ordinary course of business then in that matter, the place of supply will be considered as the location of the supplier of services.

There is this case where the consideration of the place of supply of these services will be considered as the location where the services will be performed. These are:

  • If the services are to be provided for the goods that need to be physically available then the recipient of the supplier of the services has to be available. The scenario would remain the same even if these services are acted upon by a person on behalf of the services supplier so that the services can be provided. 
  • In case of these services when provided through remote mode via any gadgets then, the place of supply has to be the location where the goods are situated at the time of the supply service. 
  • For the services of a place of supply for immovable property, it has to be directly in relation with the real estate agents and supplier as the place of supply for this would be the place where that particular immovable property has to be relocated or is intended to be located. 
  • The place of supply of the services has to be the location of the supplier for the following services rendered:
  1. Any form of the services that are supplied by a banking company, any financial situation, or any non-financial compliance. 
  2. The other one is intermediary services. 
  3. Lastly, it’s the services that consist of hiring various means of transport such as yachts, aircraft, and other vessels.

Also Read: Place of Supply for Services: Definition and Regulatory Framework

Nonresident service recipients

The rules are different for unregistered persons, for the government, and for the local authorities. For any such person or business, they have to pay GST to the government.

Also, any such services provided by an unregistered person or government should not be related to business or commerce. This is for the unregistered service recipient. Now, for the nonresident service recipients, the return has to be filed, there should be no input tax credit availability.

Reverse charge mechanism

A reverse charge mechanism is any mechanism where the holder of goods and services will have the liability to pay GST instead of the supplier.

The mechanism gets reversed here where the receipts of goods and services are supposed to pay the tax instead of the supplier. Here the charge ability gets reversed. It is planned because of the situation where the supplier is based out of India.

Another objective of doing so is to cater the burden of GST payments to the recipients so that the scope of levy of tax can be widened for many unorganised sectors.

It is also helpful in exempting different classes of suppliers and taxing the import of services. Not all but there are only a few business ventures which are in charge of reverse charge mechanisms.

The reverse charge mechanism is most accurate for the transaction of intrastate. It’s also suggested for interstate transactions. Here are some of the other conditions where the reverse charge mechanism is applicable. These are:

  • It will apply to the supply of goods and services which are specified by CBIC
  • It will apply to the goods and services from unregistered to registered dealers. 
  • It will apply to the supply of services done through e-commerce operators. The e-commerce operator includes:
  1. All the transportation services 
  2. Accommodation services in hotels and other Airbnb
  3. All the housekeeping services

Time of supply under RCM:

Following are the cases for a time of supply under RCM. These are:

  • In the case of goods 
  • In the case of services

Also Read: Reverse Charge Mechanism

Compliance obligations for service exporters

In simple words, compliance obligations for service exporters is an act where one has to abide by these rules.

It’s a command of different organisations where they have to comply with export regulations and rules concerning the jurisdiction where they intend to do business. Export compliance is a process that includes;

Screening process where it is thoroughly examined that the party is not involved in any other business with some other group or governing channel, they have to avoid business with any party or group that is sanctioned by the government, it should be assured that prohibited or controlled items are not supplied or exported, it is suggested that staff and personnel are kept up to date in coordination with export compliance, the audit is mandatory so that everything can be tracked and noticed, restriction of goods and technology and their access as well lastly, the end use of the product and end users as well. 

Conclusion

The blog shares appropriate information regarding different places of supply and the situations for the exports and imports concerning multiple business terms.

It demonstrates the different set of rules for the place of supply of goods that have to be outside India. If the location of the service recipient is outside India then there are certain rules set that need to be followed by the supplier and the receiver as well.

The place where the commodity or the good is transferred has to have all the relevant details of receiving goods. Also, the supplier has to have all the details of the goods he is sending outside of India.

All the information regarding the goods, the mode through which the goods are being sent, and the port where the goods or services are received needs proper records and tracking so that in case of any inconvenience, it can be tracked.

Also Read: Export and Import details in GSTR1

FAQs

Q1. What is the place of supply of services outside India?

The location of the recipient of service is the place of supply. So apparently, it’s the same for India as well.

Q2. What is the place of supply when the goods are exported from India?

When the goods are exported from India, the place of supply will be the location outside of India. The place of supply is any place where the goods are received.

Q3. Is GST registration mandatory for the export of services outside India?

All the goods and commodities that are supposed to be exported are considered interstate supplies. If the annual turnover is less than 20 lacs, it’s okay if the company isn’t registered for the GST.

Q4. What goods and services are sent out to other countries?

A country exports its products and services which it has a command on. The production of those goods is great and so is the experience for the exportation of the services.

If a country has expertise in the manufacturing of merchandise, tourism, telecommunications, financial services, or freight and logistics then they export it to other parts of the world. 

Q5. What are the characteristics of services?

There are four ways a service can be categorised. These are: 

  1. Inseparability
  2. Variability
  3. Intangibility
  4. Perishability

Q6. What is the shipping bill for the export of services?

Shipping bill holds great importance for the exports of goods. It’s the same document that is cleared and given by the customs office and then export is granted after that.

It contains all the relevant information of the goods that are being transported, contains all the details of the vessel on which the export goods will be exported, has the details of the port upon which the goods will be dispatched, the country, the title name of the one who is exporting and the address.

Hence, even after the export is done, the shipping bill needs to be there with the service recipient and the exporter as well. It’s because keeping records is way too important in import/export as you can find any missing data or relevant information through the shipping bill once it’s handed over to the service recipient. 

Q7. What are the exports of India?

India is a huge exporter of the following products and it is one of the reasons why India has changed the economic value of its state. These are:

  • Vehicles
  • Pharmaceuticals
  • Electric and manual machines
  • Gold and silver  

Q8. Can GST be claimed on iPhones? 

GST is claimed on these phones as they are a way of expanding the business and are a source of generating money. 

Q9. What is LUT in GST?

In GST, LUT is an abbreviated form of a letter of undertaking. This is the letter when signed by the exporter, he declares to abide by all the rules and conditions that will be set by the GST.

Q10. What is intrastate supply?

Intrastate supply is any condition when the supplier’s location and buyer’s location are the same. For example, if there is any company in India wanting goods from a company situated in India, that condition is called an intrastate supply of goods and services.

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Amitha Shet

Amitha is a creative enthusiast, which gets her into educating the world about things she comprehends. Finance, business, and digital transformation are the topics that she is profoundly interested in so that she can make things simpler for the audience. She is currently a content strategist for a fintech company. She holds a Bachelor of Engineering in Civil Engineering, although finance is a niche that piques her interest to not just educate but to invest and gain experience.

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