Under GST, 3 types of taxes can be charged in the invoice. SGST and CGST in case of an intra-state transaction and IGST in case of an interstate transaction. But deciding whether a particular transaction is inter or intrastate is not an easy task.
Think about an online training where customers are sitting in different parts of the world.
Say in case, hotel services, where the receiver may have an office in another state and may be visiting the hotel only temporarily, or where goods are sold on a train journey passing through different states.
To help address some of these situations, the IGST act lays down certain rules which define whether a transaction is inter or intrastate. These rules are called the place of supply rules.
Time of supply means the point in time when goods/services are considered supplied’. When the seller knows the ‘time’, it helps him identify due date for payment of taxes.
Place of supply is required for determining the right tax to be charged on the invoice, whether IGST or CGST/SGST will apply.
Value of supply is important because GST is calculated on the value of the sale. If the value is calculated incorrectly, then the amount of GST charged is also incorrect
1. Time of Supply
Time of supply means the point in time when goods/services are considered supplied’. When the seller knows the ‘time’, it helps him identify due date for payment of taxes.
CGST/SGST or IGST must be paid at the time of supply. Goods and services have a separate basis to identify their time of supply. Let’s understand them in detail.
A. Time of Supply of Goods
Time of supply of goods is earliest of:
- Date of issue of invoice
- Last date on which invoice should have been issued
- Date of receipt of advance/ payment*.
B. Time of Supply for Services
Time of supply of services is earliest of:
- Date of issue of invoice
- Date of receipt of advance/ payment.
- Date of provision of services (if invoice is not issued within prescribed period)
2. Place of supply
It is very important to understand the term ‘place of supply’ for determining the right tax to be charged on the invoice.
Here is an example:
Location of Service Receiver |
Place of supply |
Nature of Supply |
GST Applicable |
Maharashtra | Maharashtra | Intra-state | CGST + SGST |
Maharashtra | Bihar | Inter-state | IGST |
A. Place of Supply of Goods
Usually, in case of goods, the place of supply is where the goods are delivered.
So, the place of supply of goods is the place where the ownership of goods changes.
What if there is no movement of goods. In this case, the place of supply is the location of goods at the time of delivery to the recipient.
B. Place of Supply for Services
Generally, the place of supply of services is the location of the service recipient.
In cases where the services are provided to an unregistered dealer and their location is not available the location of service provider will be the place of provision of service.
Special provisions have been made to determine the place of supply for the following services:
- Services related to immovable property
- Restaurant services
- Admission to events
- Transportation of goods and passengers
- Telecom services
- Banking, Financial and Insurance services.
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