Understanding the Dynamics of Intra-State Service Supply in GST

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Published Date:  13-02-2024   Author:   eva-mukherjee
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Introduction

GST refers to a destination-based taxation system or consumption tax in India. GST charges a levy amount whenever goods and services are consumed and accrue to the respective state. GST consists of three different tax levels. These are SGST, CGST, and IGST. The applicability of the tax levels depends solely on the place of supply and the recipient’s location. 

IGST levy is applicable for inter-state transactions while the combination of SGST and CGST is applicable for intra-state transactions. The place of supply for services depends on either the location of the services’ recipient or the location of the services’ supplier. In this blog post, we will discuss the intra-state service supply location factors followed by the recipient’s place within the state. However, before going into details, we will give an overview of the intra-state supply of services.

Overview of Intra-state Supply of Services

According to the GST Act, intra-state supply occurs whenever the supply place and the supplier locations are the same or belong to the same states. In other words, intra-state supply refers to the supply of services or goods within the border of an Indian state. Accordingly, the taxpayer should pay Central Goods and Services Tax and States Goods and Services Tax.

Also Read: What Is An Intra-State Supply?

Place of Supply for Services in the Intra-State Transaction under Diverse Scenarios

General Rules 

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The general rules related to service recipient location in intra-state transactions are as follows-

Registered Taxpayers Location/Place of Supply
Both Supplier and Taxpayer Recipient’s Location Only
Only Supplier Consumer’s address (if the address is present)
Only Supplier Supplier’s location (if the address is not there)

Explanation in Detail

If both the recipient and the service provider are registered taxpayers, the place of supply for intra-state services will be the recipient’s location only. 

If a registered supplier or taxpayer delivers services to an unregistered consumer/individual, the place of supply with the address of the consumer only if the invoice has the consumer’s address. Alternatively, if the consumer’s address is not present in the invoice, the place of supply will be the supplier’s location.

Also Read: Place of Supply and Tax Liability in Intra-State Transactions: CGST, SGST, GST Rate and Compliance

Place of Supply for Services, where General Rules are not Applicable

Now, we will analyze the place of supply for services, which involve state-specific service supply guidelines or where GST general rules are not applicable.

Types of Services  Place of Supply 
Services delivered to immovable properties or events organized at such places Location of the respective immovable property
Admission services based on certain events  Location of the specific event venue 
Services related to events organization and their management The recipient’s location for B2B transactions and the respective Event’s location for B2C transactions 
Goods transportation service Recipient’s location for B2B transactions and the location of the goods’ delivery for B2C transactions
Passenger transportation services  Recipient’s location for B2B transactions and the location, from where the travelers get onboard for B2C transactions
Conveyance services  The point of the commencement of a conveyance journey
Media and telecommunication services  Location may vary depending on specific telecom or media service 
Brokerage, banking, and financial services  Either the supplier’s or the recipient’s location
Insurance services The recipient’s location when his address is mentioned in the invoice

Location of the Service Recipient in Intra-State Transfer of Services

According to the latest GST on intra-state services location, one can summarize the location of recipients in the case of services as follows-

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Situation Recipient’s Location
Supply from a registered business  The same business location
Supply from a other place than the business place or a fixed establishment The same fixed establishment
Supply is received at multiple establishments, which consist of both the business place and a few additional fixed establishments  The location of the establishments/places, which have direct concern with the receipt of services.
Supply when there is no place there The location of the regular place or the residence of the service recipient

Location and Type of the Recipient in B2B and B2C Supplies 

The recipient associated with the supply of services refers to the end consumer or a second business entity, for whom the transfer becomes an inward supply. Accordingly, one can classify the supply as follows-

  • B2B or Business to Business Supply and 
  • B2C or Business to Customer Supply  

The determination of both the B2B recipient and B2C recipient is essential to determine the place of supply and to apply the tax. 

Business-to-Business Supply

In this type of service transaction, both the recipient and the supplier are businesses. Accordingly, recipients use the supply during the business and their paid taxes are available to input tax credits. 

Business-to-Consumer Supply 

Here, the recipient of the service is an end consumer and the transaction goes on between a consumer and a business. Hence, the consumer does not receive any credit for the input tax. 

Supply Place/Location Rules based on B2B and B2C Transactions

In the case of B2B transactions, the recipient collects the paid taxes as credit so that the transactions simply pass through. The GST thus collected on any B2B supply creates a liability for the Indian government. However, any asset for the B2B supply recipient becomes the input tax credit for him to pay for future taxes.  

In the case of B2C transactions, the recipient’s location handles every situation, as the recipient only gets further credit. The recipient in such situations often supplies to any other customer. The supply of services or goods is consumed only when any B2B transaction converts to a new B2C transaction. Indeed, B2C transactions involve the final consumption of the supply, and the Indian government gets the paid taxes.

Also Read: The Significance of B2B Transactions in GST

Conclusion

The determination of the place of supply for services differs from the place of supply for goods in the case of intra-state transactions. The reason for this is that the supply/transaction of services involves both general rules and specific rules depending solely on its specific type. Whenever you need to deliver any type of service, make sure to check the type of service to determine the supply location accurately. Therefore, by following the CGST and SGST guidelines strictly, you will end up with successful transactions.  

Frequently Asked Questions 

  • What is the supply place or supply location in intra-state transactions of services?

Supply place or supply location in intra-state transactions of services depend on the following-

  • General rules 
  • Guidelines based on the type of delivered services 
  • B2B or B2C type of transaction
  • When to consider the location of the supplier as the place of supply?

According to the general rule associated with the place of supply for services, if the recipient’s location is absent or missing, the taxation authorities will consider the supplier’s location as the place of supply. 

  • What refers to supply in the case of intra-state transfer of services?

Intrastate supply occurs when the place of supply and the supplier of services belong to the same state or union territory. In other words, here transaction takes place within the same state boundaries. 

  • What implies the place of supply of services according to the rule of intra-state transfer of services?

The place of supply of services implies the service recipient’s location. However, the location of the unregistered dealer or non-GST taxpayer is not present in an electronic-way bill. In such cases, the service provider’s location becomes the place related to the service provision.   

  • Why are separate rules for supply location in B2B and B2C transactions?

B2B transactions do not provide direct tax credit and B2C transactions pay tax to the Indian government directly. Considering this, the Indian Government has imparted separate GST rules to determine the supply place in B2B and B2C transactions.

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Eva Mukherjee

Eva has expertise in writing content in diverse niches, including the latest rules and norms related to CGST Act, Stock Market and Shares.

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