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Place of ‘Supply’

Indirect Taxes CommitteeThe Institute of Chartered Accountants of India

CA Saurabh SinghalFCA, LL.B.

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Live Webcast Organised by Indirect Tax Committee of ICAI

13-07-2018 © Indirect Taxes Committee, ICAI

What will be the Place of Supply in case of Ex-works Sale wherein recipient is arranging for transportation?


➢ Section 10(a) & (c) of the IGST Act, 2017 provides for different scenarios to determine the POS incase of supply of goods involving/ not involving movement of goods.

➢ Section 10 is extracted as follows:

‘The place of supply of goods, other than supply of goods imported into, or exported from India,shall be as under,––(a) where the supply involves movement of goods, whether by the supplier or the recipient or by

any other person, the place of supply of such goods shall be the location of the goods at thetime at which the movement of goods terminates for delivery to the recipient;

(b) .......................................(c) 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 tothe recipient;

Place of Supply in case of Ex-works Sale


➢ FOR sale covered under 10(a). POS is location of goods at the time at which the movementterminates for delivery to recipient.

➢ Ex-works sale, whether covered under 10(a) or 10(c)? The phrase used is ‘supply which involvesmovement of goods’. Phrase is not defined.

➢ Commissioner of Commercial Taxes vs. Bhag Singh Milkha Singh 1974 (34) STC 535 (Pat.) – What isimportant to make a sale as one in the course of inter-state sale is that there must be obligation totransport the goods outside the State. The obligation may be of the seller, buyer or it may arise byreason of statute, contract between the parties, or from mutual understanding or agreementbetween them or even from the nature of the transaction which linked the sale to such transaction.



➢ Ex-work Sale is a sale at the gate of the factory of the supplier, which may or may not be transportedby is transported by the buyer, which involves movement.

➢ Thus, whether the POS is the gate of the factory OR the final destination where the buyer takes thegoods via transportation.

➢ Provisions are silent in this regards.

➢ Declaration to be taken from the buyer with regard to its destination for further transportationbefore determining the POS.

➢ In case of no declaration, it shall be presumed that the goods does not involve movement from onestate to another.



Whether Bill-to Ship-to model applies even in case of ex-factory sale?


Section 10(b) – The place of supply of goods where thegoods are delivered by the supplier to a recipient or anyother person on the direction of a third person, whetheracting as an agent or otherwise, before or duringmovement of goods, either by way of transfer ofdocuments of title to the goods or otherwise, it shall bedeemed that the said third person has received the goodsand the place of supply of such goods shall be principalplace of business of such person.

Illustration:1) Invoice from B to A2) Invoice from A to C3) Goods movement from B to C

Section 10(b) of the IGST Act, (i.e. Bill-to Ship-to Model) canbe made applicable only where the supplier is arranging forthe transportation.

Bill-to Ship-to Model

‘A’ - Third Person

Delhi

‘C’ - Recipient Haryana

‘B’ - Supplier 1

Maharashtra


Goods assembled at site


POS in case of Bill-to Ship-to of goods assembled or installed at site?


Section 10(b) – The place of supply of goods where thegoods are delivered by the supplier to a recipient or anyother person on the direction of a third person, whetheracting as an agent or otherwise, before or duringmovement of goods, either by way of transfer ofdocuments of title to the goods or otherwise, it shall bedeemed that the said third person has received the goodsand the place of supply of such goods shall be principalplace of business of such person.

Illustration:1) Invoice from B to A2) Invoice from A to C3) Goods movement from B to C

Section 10(b) of the IGST Act, (i.e. Bill-to Ship-to Model) canbe made applicable only where the supplier is arranging forthe transportation.

Bill-to Ship-to Model

‘A’ - Third Person

Delhi

‘C’ - Recipient Haryana

‘B’ - Supplier 1

Maharashtra


Import of goods


➢ Import of goods with its grammatical variations and cognate expressions, meansbringing goods into India from a place outside India

➢ Proviso to Section 5(1) of the IGST Act – Integrated tax on goods imported into Indiashall be levied and collected in accordance with provisions of Section 3 of theCustoms Tariff Act, 1975 on the value determined and at the point of tax underCustoms Act, 1962.

➢ Section 3(7) and 3(9) inserted in Customs Tariff Act, 1975 to levy IGST andCompensation Cess, respectively, on import of goods.

Import of Goods


Why is there a separate provision for POS in case of import of goods?


➢ Application of POS given u/s 10 would have led to credit blockage.

➢ There was also a need to determine POS for allocation of IGST to the appropriateconsumption State.

Import of Goods


Export of goods


Why is there a separate provision for POS in case of export of goods?


➢ Application of POS given u/s 10 would have led to payment of CGST + SGST.

➢ POS is defined as location outside India to qualify export of goods as inter-statesupply liable to IGST.

➢ There was also a need to determine POS for allocation of IGST to the appropriateconsumption State.

Export of Goods


Merchant Trading


Merchant Trading

Foreign

Seller

(FS)

Indian

Buyer (IB)

INDIA

1. Foreign Seller (FS) sells the goods to Indian Buyer (IB)

2. Indian Buyer (IB) sells the goods to Foreign Buyer (FB)

Movement of

goods Foreign

Buyer

(FB)

1 2


➢ Section 1 of IGST Act:

“Section 1. (1) This Act may be called the Integrated Goods and Services Tax Act, 2017.(2) It shall extend to the whole of India except the State of Jammu and Kashmir.............................”

Section 7(5)(a) of the IGST Act:

“Section 7(5) Supply of goods or services or both,––(a) when the supplier is located in India and the place of supply is outside India;(b) ................”

Applicable Provisions


Whether GST leviable on supply of goods:

• POS outside India• Location of supplier in India


Synthite Industries Ltd.: AAR, Kerala Dated 26.03.2018

►The applicant is neither liable to GST on the sale of goods procured from a non-taxable territory and directly supplied to a person in the non-taxable territory nor onthe sale of goods stored in a non-taxable territory, as the goods are not importedinto India at any point.

Merchant Trading - AAR


Proposed Amendment under GST

S.No.

Provision Amendments Rationale/Remarks

8Schedule III,newinsertion

7. Supply of goods from a place in the non-taxable territory toanother place in the non-taxable territory without such goods entering into the taxable territory.

It is sought to exclude from thetax net such transactions whichinvolve movement of goods,caused by a registered person, from one non-taxable territory to another non-taxable territory.


Supplies to & from SEZ


Inter-State Supply – SEZ

1 2

Supply of goods or services to a SEZ

Unit or Developer of SEZ

Supply of goods or services by a SEZ

Unit or Developer of SEZ


Why supplies to SEZ and by SEZ kept as inter-state supply?


➢ Proviso to Section 5(1) of IGST Act provides that IGST on goods imported into India shall be leviedand collected in accordance with Customs Tariff Act, 1975 and collected at point when duties ofcustoms are collected under Customs Act, 1962.

➢ Import is defined under the IGST Act to mean bringing goods into India from a place outside India.‘India’ is defined under CGST Act to mean the territory of India as referred to in Article 1 of theConstitution, its territorial waters, seabed and sub-soil underlying such waters……

➢ Custom Tariff Act, 1975 has been amended to insert Section 3(7). Said section levies IGST on anygoods imported in India.

SEZ Controversy – Proviso to Section 5(1)


Who will pay IGST on supplies from SEZ to DTA?


➢Supply to SEZs is zero rated supplies and supplies by SEZs are treated as imports.

➢Such supply is treated as import and present procedure of payment of duty continues with the variation that IGST is levied in place of CVD.

➢35. How would the sale and purchase of goods to and from SEZ will be treated? Will it be export / input?

➢37. When goods are being imported from SEZ who will pay IGST?

Clarification by Twitter


POS for supply of goods by SEZ to DTA will be as per Section 10 or 11?


➢ If Section 10 POS will apply, then POS would be place of delivery.

➢ In case goods are cleared from SEZ by buyer (in Delhi) for direct delivery to customer in Maharashtra, POS will be Maharashtra.

➢ Bill-to Ship-to will not apply as supplier not delivering the goods.

➢ Hence, logically, Section 11 POS should apply i.e. location of importer

Open Issues


Whether supply of goods by SEZ to DTA to be declared in GSTR-1 by SEZ?


➢ As per Instruction 9 to Form GSTR-1:

➢ “Any supply made by SEZ to DTA, without the cover of a bill of entry is required to be reported by SEZ unit in GSTR-1. The supplies made by SEZ on cover of a bill of entry shall be reported by DTA unit in its GSTR-2 as imports in GSTR-2. The liability for payment of IGST in respect of supply of services would, be created from this Table..”

Open Issues


Supplies to Foreign Tourist


➢ Supply made to foreign tourist shall be inter-state supply.

➢ Supply to foreign tourist has been specifically excluded from intra-state supply

➢ IGST paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded.

➢ Tourist means a person not normally resident in India, who enters for a stay of not more than sixmonths for legitimate non-immigrant purposes

Inter-state Supply - Foreign Tourist


Supply to & from Territorial waters


What will be levy of GST on supply by domestic unit to a offshore project?


Supply in Territorial waters

Delhi

MumbaiOff-shore

project

➢ Section 9 prescribes the location of supplierand place of supply in case the same is interritorial waters, to be in coastal State orUnion territory where the nearest point ofthe appropriate baseline is located.

➢ For eg: in the illustration place of supply ofgoods would be Maharashtra for goodssupplied to the off-shore project nearest tobaseline of Maharashtra


Supply in Territorial waters

Delhi

MumbaiOff-shore

project

➢ Section 9 prescribes the location of supplierand place of supply in case the same is interritorial waters, to be in coastal State orUnion territory where the nearest point ofthe appropriate baseline is located.

➢ For eg: in the illustration location of supplierof goods would be Maharashtra for goodssupplied by offshore project nearest tobaseline of Maharashtra


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