What is Place of Supply?
Under the Goods and Services Tax (GST) system in India, the “place of supply” is an important & crucial concept used to determine the location where a particular supply of goods or services is considered to have taken place for tax purposes. The place of supply is important because it determines the applicable GST rates, the state where GST needs to be paid. whether the supply is an intra-state (within the same state) or inter-state (across different states).
Whether IGST will be levied or CGST + SGST/UTGST will be levied will depend on Place of Supply. Therefore understanding the concept of “Place of Supply” is very important.
Section 10 and 11 of IGST deals with Place of supply of goods and Section 12 and 13 deals with Place of supply of services.
The GST law in India specifies different rules for determining the place of supply for goods and services:
Supply of Goods shall be divided into four main categories:
Intra-State Supply of Goods (SGST + CGST):
This category includes the supply of goods within the state in India. For such supplies, both the State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) are applicable. The tax rates depends on the specific goods being supplied.
e.g. Mr. A of Delhi supplied Goods to Mr. X of Delhi. It is Intra-state supply of goods.
Inter-State Supply of Goods (IGST)
Inter-State supply involves the movement of goods from one state to another. The Integrated Goods and Services Tax (IGST) is levied. It is levied by the central government. The IGST rate is generally uniform across states in India for inter-state supplies.
e.g. Mr. Ram of Delhi supplied goods to Mr. Sham of Maharashtra. It is Inter-state supply and IGST will be applicable.
Export and Import of Goods
When goods are sent out of India (Export) or brought into India (Import), separate provisions under GST apply to these kinds of supplies.
Exports are considered as “zero-rated supplies,” meaning no GST is levied on the supply. Exporters can claim refunds for the GST paid on input goods and input services.
IGST is levied on Imports along with customs duties.
Supplies to or by Special Economic Zones (SEZs)
Supplies made to an SEZ unit or developer are typically considered as “zero-rated supplies,”. Supplies made by an SEZ unit or developer to the domestic market are treated as regular supplies and are subject to GST. Supplies to and from SEZ is treated as Inter-state supply.
