goods and services tax (gst) place of supply rules (march...
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GOODS AND SERVICES TAX (GST)
PLACE OF SUPPLY RULES
(MARCH 2015)
CA. UPENDER GUPTA Additional Commissioner
GST Cell CBEC
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Taxation of Inter-State Sales / Supplies Present Proposed
Place of Supply – Significance Place of Supply Rules Significance Present Rules for Goods Present Rules for Services
Guiding Principles Place of Supply Rules – Issues??
PRESENTATION PLAN
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TAXATION OF INTER-STATE SALES / SUPPLIES
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Centre levies CST on Inter-State Sales - Article 269 r/w
Entry 92A of List I – Central Levy but collected &
retained by originating State
Entry Tax levied by Importing State – Article 246 r/w
Entry 52 of List II
Some %age of Input Tax Credit availed on goods used
in exported goods - retained by Exporting State
Forms used for accountal & verification of inter-state
movement of goods
Verifications at Border Check posts
ITC of CST / Entry Tax not allowed to buying dealer
PRESENT TAXATION OF INTER STATE SALES
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Centre to levy & collect Integrated GST (IGST) on supplies of goods or services in the course of inter-State trade or commerce including imports – proposed Article 269A (1)
Centre to levy non-vatable Additional Tax not exceeding 1% on inter-state supply of goods – to be collected & retained by originating State
IGST applicable to
Inter-State supplies of goods or services in India
Inter-state stock transfers of goods
Import of goods or services
ITC of IGST allowed to buying dealer
ITC of Additional Tax not allowed to buying dealer
Place of Supply Rules – proposed Article 269A (2)
PROPOSED TAXATION OF INTER STATE SUPPLIES
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PLACE OF SUPPLY
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PLACE OF SUPPLY – SIGNIFICANCE…. Determining Place of Supply of Goods or
Services is important To determine Taxing jurisdiction To be determined at sub-national level
Determining Place of Supply of goods do not pose much difficulty
In case of Goods – Place of supply generally based on the delivery i.e. physical location of
goods Where goods are not removed - where goods are
located at the time when the supply takes place Exceptions - supplies on board ships, aircraft, trains, etc. continuous supply of goods supplied through pipeline
such as oil, gas, etc.
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....PLACE OF SUPPLY – SIGNIFICANCE
Determining Place of Supply of Services is complex Supply of service is intangible May be continuous over a period of time may be spread over many places Location of service recipient and place of
consumption of service is often different In case of Service – Place of Supply - factors
Place of residence/location of the supplier Place of residence/location of the recipient Place of performance of the service Place of the location of the property in relation to
immovable property related services Place of use or enjoyment of service
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PLACE OF SUPPLY RULES
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Rules to determine whether supplies are intra-state or inter-state
Which tax to pay – CGST & SGST or IGST
Destination based Taxation as against present origin based Taxation
Tax to be paid by taxpayer in originating State
Tax to reach destination State
ITC of IGST allowed to buying dealer in destination / importing State
PLACE OF SUPPLY RULES – SIGNIFICANCE ….
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Rules to handle various situations
One supplier one customer
Both located in same State
Both located in different State
One supplier several customers
All located in same State
Located in different States
Several suppliers one customer
All located in same State
Located in different States
Imports of goods or services
Exports of goods or services
….. PLACE OF SUPPLY RULES - SIGNIFICANCE
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PRESENT RULES FOR GOODS
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Section 3, 4 & 5 of Central Sales Tax Act, 1956
Section 3 – Inter-State
Sales occasions movement from one State to another
Transfer of documents of title – during movement of goods
Goods passing through territory of other States but origin & destination of goods in same State – not treated as Inter-State
PLACE OF SUPPLY – GOODS ….
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Section 4 – Intra-State
Essentially where origin & delivery of goods is in same State
Goods passing through territory of other States but origin & destination of goods in same State
Specific goods – contract for sale – location within same State
Unascertained / Future goods – location at the time of appropriation to the contract
Single contract – goods at different locations- to be treated as separate contract for goods at each place
…. PLACE OF SUPPLY – GOODS….
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Section 5 – Import / Export
Sale or purchase occasions Export / sale or purchase effected by transfer of title of documents - after goods have crossed customs frontier
Sale or purchase occasions Import / sale or purchase effected by transfer of title of documents - before goods have crossed customs frontier
Penultimate sale – treated as Exports if specified conditions are satisfied (last sale related to export)
….PLACE OF SUPPLY – GOODS ….
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Different Treatment
Stock Transfers
Sale or Return – On approval basis
Job Work
Works contract
Goods sourced from one country & delivered / supplied in another country – both located outside India or foreign company sourcing and delivering goods in India
….PLACE OF SUPPLY – GOODS….
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Treatment under Central Excise
CE Duty payable on removal from the Place of removal
Place of removal defined – Section 4(3)(c ) of CEA & Rule 2(qa) of CCR
No distinction in intra-State or inter-State removals
….PLACE OF SUPPLY – GOODS
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PRESENT RULES FOR SERVICES
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Place of Provision of Service Rules, 2012
Used to determine place of provision of services
Within taxable territory
Outside taxable territory - Import / Exports
May be used as a starting reference with some caveats
General / Specific Rules
Location of Service Provider
Location of Service Recipient
Location of Immoveable property
Place of performance
PLACE OF SUPPLY – SERVICES ….
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Rule 3 – POP generally
Location of the recipient of service
If not available then location of the provider of service
Rule 4 – Performance based services – POP where the services are actually performed
Goods made available
Person made available
Rule 5 – Services relating to immovable property – POP where the immovable property is located or intended to be located
Rule 6 – Services relating to events – POP where the event is actually held
…. PLACE OF SUPPLY – SERVICES ….
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Rule 7 – service referred to in rules 4, 5 or 6 & provided at more than one location, including a location in the taxable territory- POP is the location in the taxable territory where the greatest proportion of the service is provided
Rule 8 – Where both SP and SR located in taxable territory- POP is location of SR
Rule 9 - POP is location of SP
Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders
Online information and database access or retrieval services
Intermediary
Hiring of means of transport upto one month
…. PLACE OF SUPPLY – SERVICES ….
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Rule 10 – Goods Transportation other that mail/courier/GTA
POP is Destination of goods
GTA- POP is location of person liable to pay ST
Rule 11 – Passenger Transportation – POP is Place of embarkation
Rule 12 – Services on board a conveyance – POP is first scheduled point of departure
…. PLACE OF SUPPLY – SERVICES….
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Rule 13 – Central Government has power to notify any description of service or circumstances
Guiding principle – POP is place of effective use and enjoyment of a service
Rule 14 – Order of application – more than one – later Rule
…. PLACE OF SUPPLY – SERVICES
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GUIDING PRINCIPLES
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Principles for good Supply Rules
Destination is where effective use and enjoyment – OECD Draft Paper – February , 2013
Revenue neutrality should be achieved to the extent possible
Tax administration should not lay claim to B2B transaction, being a wash transaction, unless intended otherwise
SGST to reach the State where supplies are actually made – competing demand from States
Destination / Consumption Principle
Decision as to how to conduct business should not be influenced by tax policy unless specifically intended
GUIDING PRINCIPLES….
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GST chain should integrate with the supply chain. Input Stage Tax should move along with supply chain and ultimate incidence of tax should be at the final consumption point
Rules should be implementable without any undue compliance burden to the taxpayer or administrative complexities to tax administration
Rules should be such that they would not lead to increase in cascading burden and not deviate from the objective of creating a common market under GST regime
Rules for B2B supplies should normally be the location of recipient of goods or services and not where goods / services is actually delivered / performed
….GUIDING PRINCIPLES
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PLACE OF SUPPLY RULES – ISSUES??
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How to determine inter-state?
Location of recipient vs Place of consumption
Rules for B2B & B2C supplies - certain services
Telecommunication
Banking & Financial Services
Works Contract
Sporting / recreational event
Repairs
Job work
PLACE OF SUPPLY RULES – ISSUES??
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