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Destination based taxation is a system wherein revenue from tax relating to goods or services accrues to the jurisdiction where they are being ultimately consumed. It is also called consumption tax.

For Example, if A in Maharashtra Produces the goods and sells to B in Karnataka, then in such case revenue should go to the state of Karnataka instead of Maharashtra. This is Destination based taxation.

GST is Destination based taxation or consumption based taxation. By Destination based tax we mean that the revenue accrued to the place where the goods or services are consumed. Therefore Place of Supply in GST is nothing but the place where the goods or services are consumed.

Place of Supply is determined with the help of general or specific rule of place of supply. The general rules determine the place of supply with respect to the location of the recipient of the goods or service. The specific rule determines the place of supply with respect to specific rules applicable to the specific situation.

Place of supply of Goods


Section of IGST Act

Situation

Place of Supply

10(1)(a)

Supply Involves Movement of Goods

Location of the goods at the time of at which the movement of goods terminates for delivery to the recipient

Example: B comes to Rajasthan and purchase some goods from A and told to send the goods to Delhi, A takes the bilty in his own name and send the goods to B in Delhi. In the given case, POS would be Delhi, as effective control of the goods to B is handed in Delhi.

10(1)(b)

Goods are delivered by the supplier to a recipient or any other person, on the direction of a third person by way of by way of documents of title to the goods or otherwise

It shall be deemed that the said third person has received the goods and the POS of such goods shall be the principal place of business of such person.

Example: A in Rajasthan supplies goods to B in Delhi. B in Delhi asks A to send the goods to C in Maharashtra. Therefore, as the goods have been send to C in Maharashtra by A on the direction of B, the POS would be Delhi.

10(1)(c)

Supply does not involve movement of goods

Location of such goods at the time of the delivery to the recipient.

Example: A and B both located in Rajasthan. B comes to shop of A. A delivers goods to B. POS would be Rajasthan.

10(1)(c)

Goods are assembled or installed at Site

Place of supply shall be the place of such installation or assembly.

10(1)(d)

Goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle

Location at which such goods are taken on board

10(1)(e)

Place of supply of goods cannot be determined as per above rules

POS shall be determined in such manner as may be prescribed


Place of supply of Services

(A) Whether Both Location of Supplier of Service and Location of Recipient of Service in India

  • General Rule Section 12(2)
  • Specific Rule Section 12(3) to 12(14)

General Rule Section 12(2) of IGST Act, 2017:- If the recipient is a registered person then the place of supply would be the location of Recipient of service. If recipient is not a registered person and address of recipient exists on record then POS would be the location of the recipient. However in case the address of recipient does not exists on record, then the place of supply of service would be the location of the supplier of service.

Example: A located in Gujarat receives services at Gujarat from B Located in Rajasthan. A is a registered person under Gujarat GST. In this case POS will be Gujarat.

Specific Rule Section 12(3) to 12 (14) of IGST Act, 2017:-


Section of IGST Act

Situation

Place of Supply

12(3)

In relation to immovable property, accommodation at hotel, for social, religious function etc or services ancillary to it

Location at which the immovable property or boat or vessel is located or intended to be located, and if located outside India, location of service recipient

Example: (1) A in Delhi wants to construct a building at Jaipur. He hires an engineer based at Kolkata. POS in this case would be Jaipur as immovable property is intended to be located in Jaipur.

Example: (2) Sita registered in Jaipur. She goes to Kolkata and stays in a hotel at Kolkata. She also charges for use facility of Beauty treatment at hotel. POS would be Kolkata for accommodation service by hotel and Beauty treatment as it is an ancillary service to the accommodation

12(4)

Restaurant and catering services, personal grooming, fitness, beauty treatment, health service

Where the services are actually performed

12(5)

Services in relation to training and performance appraisal

If recipient is registered than location of such person, otherwise location where the service actually performed.

Example: A located at Delhi provides training at Kolkata to employees of M Ltd, which is registered at Mumbai. POS will be Mumbai. If M Ltd is not a registered than POS will be Kolkata.

12(6)

Services provided by way of admission to a cultural artistic, sporting, scientific, educational, or entertainment event or amusement park or ancillary service

Where the event is actually held or where the park or such other place is located.

12(7)

Service provided by way of-

  1. Organization of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of service in relation to a conference fair, exhibition, celebration or similar or events, or
  2. Service ancillary to organization of any of the above events or services, or assigning of sponsorship of any of the above events.

If recipient is registered than location of such person, otherwise location where the event is actually held. If the event is held outside India, the place of supply shall be the location of the recipient.

Example:1.  K organizing a cultural event at Mumbai. He is registered in Kolkata. D is a registered person in Delhi, provides his services at Mumbai. POS would be Kolkata. However if K is not registered than POS would be Mumbai. 

Example:2. A who is resident in Mumbai hires B who is resident of Jaipur to provide services for organizing an event at USA. POS would be Mumbai.

12(8)

Services by way of transportation of goods, including by mail or courier

If recipient is registered than location of such person, otherwise location at which such goods are handed over for their transportation

Example: D is registered person in Delhi. He sends some goods from transportation from Kolkata to Mumbai. POS would be Delhi. However if D is not registered person than POS would be Kolkata.

12(9)

Passenger transportation service.

If recipient is registered than location of such person, otherwise place where the passenger embarks on the conveyance for a continuous journey.

Return Journey shall be treated as a separate journey.

12(9)

Example:1 Journey from Mumbai-Delhi-London-Delhi: POS Delhi

Example:2 Journey from London-Mumbai-London: POS London

Example:3 A books two tickets. 1st is Mumbai-Delhi and 2nd is Delhi-Mumbai for Return. In this case for 1st case POS is Mumbai and for 2nd Delhi. (all these example treated as unregistered.)

12(10)

Service on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle

Location of the first scheduled point of departure of that conveyance for the journey.

12(11)a

Telecommunication services including data transfer, broadcasting cable and direct to home television services

Where the fixed telecommunication line is installed for receipt of service

Example: A Limited registered at Mumbai provides a dish antenna at house of B in Jaipur. POS would be Jaipur

12(11)b

Mobile connection for telecommunication and internet services provided on post- paid basis

Location of Billing address of the recipient of service of the supplier of service

12(11)c

Mobile connection for telecommunication and internet services provided on pre payment through a voucher

Location where such pre payment is received or vouchers are sold

12(11)d

Mobile connection for telecommunication and internet services provided on pre payment through electronic mode or internet banking

Location of the recipient of service on record of the supplier of service

12(12)

Banking and other Financial services including stock broking services

Location of the recipient of services on the records of the supplier of services. If not, the location of the supplier of services.

Example: D in Delhi has a bank account with SBI. The address on record available with bank is in Kolkata. POS is Kolkata

12(13)

Insurance Services

If recipient is registered than location of such person, otherwise location of the recipient of services on the records of the supplier of services.

Example: A is person located at Jaipur and taken an insurance policy from a company based in Mumbai. If A is registered then POS would be Jaipur. Otherwise location of the recipient of services on the records of the supplier of services.

12(14)

Advertisement services to Central Government, a state government, a statutory body or a local authority

Located in each of such states and the value of such supplies specific to each state shall be in proportion to amount attributable to service provided by way of dissemination in the respective states.

Example: A Ltd, located and registered in Mumbai has been appointed as an Advertisement Agency by Government of Rajasthan for Advertisement of Make in India in the entire state of Rajasthan. POS would be Rajasthan.


(B) Whether Location of Supplier of Service or Location of Recipient of Service is outside India

  • General Rule Section 13(2)
  • Specific Rule Section 13(3) to 13(13)

General Rule Section 13(2) of IGST Act, 2017:- Wherein either location of the supplier or location of recipient of service is outside India is as follows:

  1. The default provision states that POS in such cases would be location of recipient of services.
  2. If location of recipient is not available in ordinary course of business, then POS would be location of supplier of services.

Specific Rule Section 13(3) to 13 (13) of IGST Act, 2017:-


Section of IGST Act

Situation

Place of Supply

13(3)(a)

Services supplied in respect of goods that are required to be made physically available by the recipient of service to the supplier of service, or to a person acting on behalf of the supplier of service in order to provide the service.

Location where the services actually performed

Remarks: The basic requirements of a service to be covered under this rule is that the goods temporarily come into the physical possession or control of the service provider and without this happening, the service cannot be rendered. Thus the service involves movable objects or things than can be touched, felt or possessed.

Example: A sends the goods to B for repairing of the said goods. The goods are again handed over to A by B after repairing. The POS would be where the service are performed by B.

Proviso

When such services are provided from a remote location by way of electronic means.

This clause shall not apply in the case of a service supplied in respect of goods that are temporarily imported into India for repair and exported after repairs without being put to any use in India, other than that which is required for such repair

Location where goods are situated at the time of supply of service.

13(3)(b)

Services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

POS would be the location where the services are actually performed.

13(4)

Services supplied in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators

Place where the immovable property is located or intended to be located.

13(5)

Services supplied by way of admission to, or organization of, a cultural, artistic, sporting, scientific, education, or entertainment event, or a celebration, conference, fair, exhibition, or similar event, and of services ancillary to such admission or organization

POS shall be the place where the event is actually held.

Example: A comes from USA and attends a conference at Mumbai. POS would be Mumbai.

13(6)

Where services referred in above 13(3), 13(4), 13(5) is supplied at more than one location, including a location in the taxable territory

Location in the taxable territory where the greatest proportion of the service is provided

13(7)

Where services referred in above 13(3), 13(4), 13(5) is supplied at more than one state

POS of such services shall be taken as being in each of the states in proportion to the value of services so provided in each state

13(8)

(a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.

POS shall be the location of the supplier of services

Example: A located in India, gives intermediary service to B located in USA. POS would be location of supplier of service i.e. A, India. 

13(9)

Services of transportation of goods, other than by way of mail or courier

POS would be destination of the goods

Example: A send some goods through transporter from India to USA. POS would be USA.

13(10)

Passenger transportation service

Where the passenger embarks on the conveyance for a continuous journey

Example: A resident of USA, goes to UK from India. He embarks from India. POS would be India.

13(11)

Service provided on board a conveyance during the course of a passenger transport  operation, intended to be consumed while on board

First scheduled point of departure of that conveyance for the journey

13(12)

Online information and database access or retrieval services

Location of recipient of service

13(13)

In order to prevent double taxation or non-taxation of the supply of a service, or

for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.



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Category GST, Other Articles by - CA. Dau Daga 



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