How is the place of supply determined for goods?

The place of supply is a critical factor in determining the applicability of GST in India. It helps to identify whether the supply is intra-state or inter-state, which, in turn, determines the type of tax that applies (CGST + SGST or IGST).

Under the Goods and Services Tax (GST) Act, the place of supply for goods is primarily governed by Section 10 of the IGST Act, 2017, along with specific provisions in the CGST Act, 2017.

Provisions Related to Place of Supply for Goods

The place of supply for goods is determined as per Section 10 of the Integrated Goods and Services Tax (IGST) Act, 2017, and other relevant provisions in the CGST Act, 2017. Here’s how the place of supply for goods is generally determined:

1. Section 10(1) of the IGST Act – Place of Supply in Case of Goods

• Goods supplied within India (Intra-State Supply):
  • The place of supply is the location of the goods at the time of supply.
  • If the goods are moved, the location of the goods at the time of delivery is considered the place of supply.
• Goods supplied from one state to another (Inter-State Supply):
  • If the goods are supplied and transported across state borders, the place of supply is the destination of the goods (i.e., the location to which the goods are delivered).
  • The supply is treated as Inter-State Supply and is subject to Integrated GST (IGST).

2. Place of Supply in Case of Movement of Goods:

• Section 10(1)(a) of the IGST Act specifies that the place of supply of goods is the location of the goods at the time of delivery in the case of a supply of goods where the movement of goods is involved.Example: If a supplier in Mumbai ships goods to a buyer in Delhi, the place of supply will be Delhi because that is where the goods are delivered.

3. Place of Supply in Case of No Movement of Goods:

• Section 10(1)(b) of the IGST Act applies when the supply does not involve any movement of goods.
  • The place of supply in this case is the location of the goods at the time of delivery, i.e., where the goods are physically transferred to the recipient.
  Example: If goods are sold and delivered at the seller’s premises (no movement involved), the place of supply is the seller’s location.

4. Special Provisions for Specific Supplies:

Certain types of supplies have special provisions regarding the determination of the place of supply:

• Goods sold on approval: For goods supplied on approval or on a “sale or return” basis, the place of supply is the location where the goods are delivered.
• Installment or continuous supply of goods: For such supplies, the place of supply is determined based on the location of the goods at the time the goods are actually delivered.

5. Place of Supply for Export and Import of Goods:

• Exports: The place of supply of goods exported out of India is the location of the exporter (India). Exports are zero-rated supplies, meaning they are exempt from GST.
• Imports: The place of supply of goods imported into India is the place of importation (India). This supply is subject to IGST.

Acts in the Indian Constitution Relevant to Place of Supply

1. Constitution (One Hundred and First Amendment) Act, 2016:
   • This amendment to the Indian Constitution paved the way for the introduction of GST and provided for GST taxation on goods and services at the national level.
2. Article 246A:
   • Grants both the Union and the State Governments the power to legislate on taxes related to the supply of goods and services.
3. Article 269A:
   • Defines the authority to levy and collect taxes on the supply of goods and services between states, as well as the authority of the Union Government to collect IGST on inter-state supplies.
4. Article 279A:
   • Established the GST Council, which provides recommendations on the administration of GST, including defining the place of supply and resolving disputes related to inter-state and intra-state supplies.

Landmark Cases and Judgments Related to Place of Supply for Goods

1. M/s. Reckitt Benckiser (India) Ltd. v. Union of India (2020):
   • This case dealt with whether the transportation charges (freight) for goods delivered to another state were part of the place of supply considerations for the sale of goods. The court ruled that the destination principle applies for determining the place of supply in the case of inter-state movement of goods.
2. M/s. M/s. Indian Oil Corporation Ltd. v. State of Jharkhand (2017):
   • This case clarified that when goods are supplied from one state to another, the place of supply will be the destination of the goods. Hence, IGST will apply on inter-state sales of goods.
3. Bharat Petroleum Corporation Ltd. v. Union of India (2021):
   • This case involved determining the place of supply for petroleum products. The Supreme Court ruled that even though the goods (petroleum) were delivered to the buyer at a different location, the place of supply remains where the delivery takes place, aligning with the destination-based principle.

Key Takeaways:

1. The place of supply for goods is primarily determined by whether there is movement of goods or not.
   • If there is movement of goods, the place of supply is where the goods are delivered.
   • If there is no movement, the place of supply is the location where the goods are physically transferred.
2. For inter-state supplies, the place of supply is the destination of the goods (the buyer’s location), and it attracts IGST.
3. For exports, the place of supply is considered as outside India, making it a zero-rated supply.
4. Import of goods is considered to be a supply within India, and it is subject to IGST.

Understanding the place of supply for goods helps businesses determine whether the transaction is intra-state (CGST + SGST) or inter-state (IGST) and ensures correct tax compliance under the GST framework.