The concept of place of ‘supply of goods’s new in indirect taxation as presently ‘place of removal’ is relevant in central excise and ‘sale’ is relevant for value added tax. With GST, place of removal will no longer be relevant which has been a subject matter of interpretation and litigation in the present law.
Section 5 of Model IGST law provides for provisions to determine the place of supply of goods only. Supply of goods may or may not involve movement of goods and supply of goods may take place under different situations and for different type of goods by supplier or receiver itself.
Place of supply matrix
Place of Supply
|2||Where supply involves movement of goods||Location of goods when movement of goods terminate for delivery to recipient|
|2A||Where goods are delivered on directions of third person (transfer of documents)||Principal place of business of third person who shall be deemed to have received the goods|
|3.||Where no movement of goods is involved||Location of goods at the time of delivery to the recipient|
|4.||Where goods are assembled / installed at site||Place of installation or assembly|
|5.||Where goods are supplied on board a conveyance||Location at which goods are taken on board.|
|6.||Residual situation not falling in above specified ones||To be determined by law on recommendation of the Council|
These provisions are discussed hereunder-
- Where supply involves movement of goods (sub-section 2)
Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
In this case, movement of goods can be by any person- supplier, receiver or any other person, say a goods transport agency but the supply of goods must involve movement thereof. Here the criteria is the location of goods where such movement terminates for delivery to the recipient. Generally, it will be the location of receiver of goods.
- Delivery based place of supply (sub-section 2A)
Where the goods are delivered by the supplier to a recipient or any other person, on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.
Goods may be delivered to receiver or his agent or on his direction to any other person. It may be before or during the movement of goods and such delivery may be actual or by way of transfer of documents of title on goods. In case of such delivery of goods to third person, it shall be deemed that the place of supply of goods shall be the location of principal place of business of such person taking the delivery of goods.
Principal place of business is defined in section 2(78) of the Model GST law. Accordingly, it means the place of business in the certificate of registration where the taxable person keeps and maintains the accounts and records as specified in law. (i.e., section 42 of GST Act). It may be noted that place of supply under sub-sections (1) and (2) may be different.
- Where no movement is involved (sub-section-3)
Where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient.
In cases where no movement of goods is involved, either by supplier or by the recipient,place of supply of goods, the location of goods itself at the time of delivery will constitute the place of supply of goods.
- Goods which are assembled / installed (sub-section 4)
Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly.
Where the goods are supplied for assembly, installation (or even commissioning, erection, fabrication etc) at site, place of supply of goods in question shall be the location of site where goods are supplied and used for assembly etc.
- Goods supplied on board a conveyance (sub-section 5)
Where the goods are supplied on board a conveyance, such as a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.
For supplies on board a conveyance (e.g. train, aircraft, vessel, motor vehicle etc), since conveyance is a moving subject, place of supply shall be the location where goods are taken on board. For example, in a Shatabdi train from New Delhi to Dehradoon, food is supplied or taken at board at New Delhi. The place of supply shall be New Delhi irrespective of where goods are consumed or where the train terminates. This provision is different from sub-section (1) where goods move from one place to another and goods are subject. Suppose there is a flight between New Delhi and New York with a stopover at Dubai and goods (say food items and fuel) are supplied at New Delhi as well as Dubai airports. In this case, place of supply will be New Delhi for goods supplied at New Delhi and Dubai for goods supplied at Dubai Airport. In sub-section (5), it is not so.
- Residual provision (sub-section 6)
Where the place of supply of goods cannot be determined in terms of sub-section (2), (3), (4) and (5), the same shall be determined by law made by the Parliament in accordance with the recommendation of the Council.
This is a residual clause providing that if the supply of goods can not be determined as per sub-sections (2), (3), (4) and (5) of section (5), it shall be determined as per law which of course, is going to as made by the Parliament on the recommendation of the GST council.
There appears to be a drafting error in sub-section (6) as it refers to sub-sections (2), (3), (4) and (5) but omits reference to sub-section (2A). The provision of sub-section (6) should apply to all sub-sections (2) to (5) including (2A).
(To be continued…..)