Paying the taxes is complex. However, making mistakes in paying these taxes will create more complications for you. Moreover, the goods and services tax is levied based on the rules that govern them through the applicable laws. A very important factor that helps in the appropriate treatment of tax in business transactions is a place of supply. The place of supply is usually the location where any goods or services are delivered. However, since many different kinds of supply can happen, as per the provisions of the GST Law, many types of places of supply can affect the GST treatment of a business transaction. So, we’re here to help you get compliant by understanding the different types of places of supply, their classifications, legal definitions and impact on taxation.
Classification of places of supply
To understand the different types of places of supply, first, you’ll need to know how they are classified. Here’s a brief table to help you understand the classification of places of supply:
Classification on basis of types of supply
| Classification of Places of Supply | Basis for Classification |
| Type of Supply |
|
| Territorial Classification |
|
| Domestic Supply |
|
| International Supply |
|
| Taxability |
|
The final types of places of supply applicable to a particular transaction depends on this broader classification of places of supply in India. In most cases, when the recipient is a GST registered individual or entity, you’ll only have to focus on one type of places of supply, ie., the location of the recipient.
Also Read: Why Is the Place of Supply Important?
Differentiating Places of Supply in Business Transactions
The places of supply in business transactions will be differentiated based on the classification of the transaction. Moreover, differentiating amongst the different places of supply is very important in all business transactions. If you do not differentiate the places of supply by the applicable GST Laws, you may mistakenly choose the wrong place of supply. So, consider the following important factors while differentiating places of supply in business transactions to obtain accurate results:
Location of the Supplier
The place or registered office address of the supplier is a very important factor in differentiating the different types of places of supply. It determines the territorial jurisdiction of a transaction.
Also Read: How Is The Place Of Supply Determined For Services?
Location of the Recipient
It is essential to determine the places of supply in all business transactions. Only when you know the location of the recipient can you accurately determine the type of place of supply applicably? Moreover, it will help you decipher the applicable tax law, CGST IGST, or UTGST.
Nature of Supply
Classify the goods and services on their factors. Whether there is the movement of goods or performance of services, or if the transaction is event contingency based.
Delivery or Performance
Another important factor that can help in differentiating between the places of supply is the final delivery of goods or the performance of services.
Identifying specific types of places of supply
After a careful consideration of all the factors that help in determining the place of supply, you need to identify the specific types of places of supply with the help of the following factors:
Determine Applicable Laws
In India, the complexities of the GST laws are governed by both, the state and central government. So, the first thing you need to identify is the country or the state where the transaction is happening. So you can determine which component of the GST is applicable.
Understand the General Rules
After knowing the laws in detail, you need to understand the applicable rules in general. As a result, it will help you determine the specific places of supply based on the rules and laws applied.
Consider Exceptions
All rules have exceptions. That being said, while identifying the specific places of supply, don’t focus on just the rules. You’ll also need to understand the special exemptions or benefits. For example, in India, certain Special Economic Zones (SEZs) are often entitled to benefits. Disregarding these exceptions can also lead to inaccuracy in the final determination of the type of place of supply.
Use Resources
Helpful resources like this blog post and official government websites can help you determine the perfect type of place of supply. Moreover, even the tax authorities can help you from making mistakes. These days, even the authorities post a lot of content on their websites.
Legal definitions and categorizations of places of supply
Until now, we’ve focused on understanding the generic definition of places of supply. However, to know the concept of different types of places of supply in detail, you might have to dive deeper into the legal waters. In India, the places of supply help in determining, whether Integrated GST, Central GST, or State GST is applicable. Moreover, the IGST Act and CGST Act are two governing laws that have definitions and rules for the categorization of the places of supply. The common legal definitions and categorizations include:
Places of Supply for Goods
As per legal definition, the place of supply for goods is the location of goods at the time of delivery to the buyer. For example, if certain goods are delivered from Maharashtra to Chennai, the place of supply for goods shall be Chennai. However, in cases where there is no movement of goods, the place of supply is the location where ownership is finally transferred.
Places of Supply for Services
Usually, the place of supply for services is the recipient’s address of performance-based services, the location where the services were performed.
Also Read: Place Of Supply For Goods: Definition And Legal Framework
Governing Laws
The above rules for categorization of the places of supply are derived from the legal definitions as follows:
Integrated Goods and Service Tax Act, 2017
This Act, also known as the IGST Act. It was introduced in 2017. With the aim to simplify the levy of goods and services taxes. Especially the integrated taxes, which are applicable when you partake in indulge in business transactions. This act provides the legal definitions and categorization of the places of supply in the following provisions:
Section 10
It categorises the places of supply for all inter-state domestic transactions. This section defines the following legal meaning of types of place of supply:
- For movement of goods, the place of supply is the location of the recipient;
- When you involve a third party for delivery, the place of supply is the principal place of business of the said third party;
- When there is no movement, the location of delivery is the place of supply.
Section 11
It governs the import and export of goods to and from India. The key points are:
- The location of importer is the place of supply for goods imported into India;
- Location outside India is the place of supply for goods exported out of India.
In this provision, the place of supply for export doesn’t matter for a specific place of supply because the export of goods is a zero-rated tax treatment.
Section 12
This section categorises the rendering of services, where the location of the supplier and recipient is in India. It states that:
- For all GST-registered recipients, the place of supply is the location of the recipient; and
- For all unregistered recipients of services, the place of supply is the registered address/location of the service provider.
Apart from this, there are many specific categorisations of the different types of places of supply, such as:
| Specific Service | Categorization of Places of Supply |
| In relation to immovable property | Location where the property is situated |
| Services related to restaurants, grooming, catering, and more | Place of supply is where the services are performed |
| Training Services | If recipient is registered, their address, and it not, then the place of supply is where the services were performed |
| Cultural and Sporting Events | The place where the event was/is held |
| Transporting of Goods | If recipient is registered, their address, If not, the place of supply is the place where goods are delivered |
| Transportation of passengers | If passengers are GST registered, their place of business. However, if not, the place where the passengers boarded the transportation. |
Central Goods and Service Act, 2017
This is the full form of the CGST Act. Besides, it applies to all intrastate transactions taking place within the territories of India. Section 9 of the Act states how the places of supply are determined and how the taxes are levied on all business transactions, except for the sale of alcohol for human consumption. Moreover, as per this provision, the taxable person is usually the supplier. It also has certain special provisions for the e-commerce service providers in India. Hence, you must go through the provisions that allow these categorizations in detail.
Impact of place of supply types on taxation
Apart from the above-mentioned legal regulations, different local laws are also implemented to make the levying of GST more simple for the local tax authorities. Hence, depending on your place of supply, also take a look at the other applicable laws, to ensure that you have paid your GST appropriately. This is much more important for the supplier as they are usually the ones on whom GST is levied. Here are the ways that the place of supply types can impact taxation in India.
Determines Jurisdiction
The tax rules, along with the different factors involved in the business transaction will allow you to determine the appropriate jurisdiction.
Tax Rates
The applicable tax rate depends on the type of supply and the place of supply. Hence, the PoS allows you to see the actual tax rate applicable to you. In this way, you can avoid double taxation, by paying taxes in the appropriate jurisdiction.
Helpful for tax authorities
The different types of places of supply also make it easy for the authorities of India to verify whether all taxes are paid by the business transactions happening over the nation. This has helped a lot in streamlining the entire process of levying GST.
Conclusion
To conclude, it is pretty evident that for business owners, ideally, understanding the diversity in the types of places of supply based on the different rules and legal definitions is a must. With that said it cannot be understated that the rules of determining the types of places of supply are very complex. You can easily leverage technology by using software tools for managing your GST compliance and billing.
FAQs
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What are the different types of supply?
Different types of supply include Market supply, long-term supply, short-term supply, joint supply and composite supply.
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Why is a place of supply important?
Place of supply is important to ensure proper treatment of the Goods and Services Tax in India.
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What does zero-rated supply mean in types of places of supply?
The term zero – rated supply refers to a supply made outside of India. Hence, here the tax rate applicable to suppliers will be zero. It is most common in some exports of goods.
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What is the place of supply for services?
The place of supply for services is ideally the location of the service recipient.
