Currently, taxes are imposed on taxable services such as manufacture, provision of services, sale of goods etc. Under the GST regime, all of this will be replaced by the concept of supply. In other words, the understanding place of supply of a good or service will become the very taxable event under the GST. In this light, it is vital to understand how to determine the place of supply so as to ascertain the proper taxes to be levied on the supply of goods and services, both intrastate and interstate.
In this article, we discuss two crucial components that ascertain what kind of tax is charged on a particular supply. These are the location of the supplier and the place of supply.
The location of the supply is the registered or principal place where the supplier conducts his business. The place of supply refers to the recipient’s registered place of business. As an illustration, let us take Viruti Cars registered in Mumbai, Maharashtra. This company provides cars and car parts to Figgy Automobiles registered in Pune, Maharashtra. In this transaction, since both the locations of the supplier and the recipient are in Maharashtra, it qualifies as an intrastate supply. The taxes thus leviable on this supply will be CGST and SGST.
As another illustration, let us understand that Viruti Cars is registered in Tamil Nadu and it supplies cars and car parts to Figgy Automobiles registered in Pune, Maharashtra. Here, the location of the supplier is Tamil Nadu and the location of the place of supply (or location of the recipient) is Maharashtra. In this transaction, since both the locations of the supplier and the recipient are in different states, it qualifies as an interstate supply. The taxes thus leviable on this supply will be IGST.
Some other interstate supplies also include when goods or services are being either imported or exported or if goods and services are being supplied to or by a developer of a Special Economic Zone or unit, even when such supply takes place within a state.