INTER STATE SUPPLY
The term Inter state supply is described under the Section 7(1) of the IGST Act.
It is a supply of goods or services, where the location of the supplier and place of supply are in-
- Two different States;
- Two different Union territories; or
- A State and a Union territory
It also includes import of goods or services into the territory of India.
Further, the following shall be treated as an inter-state supply of goods or services:
- When the supplier is located in India and the place of supply is outside India;
- To or by a Special Economic Zone (SEZ) developer or a SEZ unit; or
- In the taxable territory, not being an intra-state supply and not covered elsewhere.
PRINCIPLES DEFINING INTER STATE SUPPLY
PLACE OF SUPPLY OF GOODS
Section 10 of IGST Act, 2017 formulate the principles to determine the ‘Place of Supply of goods’.
Place of supply of goods, other than supply of goods imported into, or exported from India
Section 10(1)(a) – Movement of Goods
- Supply involves Movement of Goods;
- Movement by any person i.e. Supplier, Recipient or Any Other Person:
- Place of Supply of such goods shall be the location of goods at the time at which the movement of goods terminates for delivery to the recipient;
Example: Rathi Limited of Rajasthan sells 50 cell phones to Shah Traders in Gujarat. Rathi Limited delivers the product to Shah Retailers in its warehouse in Ahmedabad. Place of supply, in this case, will be Ahmedabad and IGST will be levied as it is an Inter-State transaction.
Section 10(1)(b) – Persons stated for Bill to and for Ship to are differ from each other.
Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;
Section 10(1)(c) – Supply not involve movement of goods
- Supply does not involve movement of goods;
- Whether by the Supplier or the Recipient;
- Place of supply shall be the location of such goods at the time of the delivery to the recipient;
Example: Bharat Limited registered in Maharashtra sold its pre-installed transmission tower(electric tower) located at Madhya Pradesh to Hindustan Limited registered in Delhi. In this case, the location of the supplier is Maharashtra, but a place of supply will be Madhya Pradesh. Hence, IGST will be levied.
Section 10(1)(d) – Goods supplied and assembled or installed simultaneously
Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;
Example: Bharat Limited registered in Maharashtra opens a new office in Delhi. It purchases 10 ACs to be installed at its Delhi office from Patil electronics in Maharashtra. In this case, the location of the supplier is Maharashtra, but a place of supply will be Delhi. Hence, IGST will be levied.
Section 10(1)(e) – Goods supplied on board
Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.
LOCATION OF RECIPIENTS OF GOODS AND SERVICES
Location of recipient of services has been defined in section 2(14) of the IGST Act to mean:
- Where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;
- Where a supply is received at a place other than the place of business for which registration has been obtained, the location of such fixed establishment;
- Where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
- In absence of such places, the location of the usual place of residence of the recipient.
Usual place of residence, in case of an individual means, the place where the person ordinarily resides. In other cases it means the place where the person is incorporated or otherwise legally constituted.
LOCATION OF SUPPLIER
Location of supplier of services as defined in section 2(15) of the IGST Act is the mirror image of location of recipient of services.
- Where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
- Where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
- Where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
- In absence of such places, the location of the usual place of residence of the supplier.
TIME OF SUPPLY
TIME OF SUPPLY OF GOODS
Time of supply of goods is earliest of:
1. Date of issue of invoice.
2. Last date on which invoice should have been issued.
3. Date of receipt of advance/ payment*.
For example:
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th January. The payment was received on 31st January. The goods were supplied on 20th January.
Time of supply is earliest of –
1. Date of issue of invoice = 15th January
2. Last date on which invoice should have been issued = 20th January
Thus the time of supply is 15th January.
If an advance of Rs 50,000 is received by Mr. X on 1st January:
The time of supply for the advance of Rs 50,000 will be 1st January (since the date of receipt of advance is before the invoice is issued). For the balance Rs 50,000, the time of supply will be 15th January.
TIME OF SUPPLY FOR SERVICES
Time of supply of services is earliest of:
1. Date of issue of invoice
2. Date of receipt of advance/ payment.
3. Date of provision of services (if invoice is not issued within prescribed period)
Example:
Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was issued on 20th January and the payment for the same was received on 1st February.
Firstly check if the invoice was issued within the prescribed time or not. The prescribed time is 30 days from the date of supply i.e. 31st January. The invoice was issued on 20th January. This means that the invoice was issued within a prescribed time limit.
The time of supply will be earliest of –
1. Date of issue of invoice = 20th January
2. Date of payment = 1st February
This means that the time of supply of services will be 20th January.
TIME OF SUPPLY UNDER REVERSE CHARGE
In case of reverse charge the time of supply for service receiver is earliest of:
1. Date of payment*
2. 30 days from date of issue of invoice for goods (60 days for services)
For example:
M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th January. The invoice was raised on 1st February. M/s ABC Pvt Ltd made the payment on 1st May.
The time of supply, in this case, will be earliest of –
1. Date of payment = 1st May
2. 60 days from date of date of invoice = 2nd April
Thus, the time of supply of services is 2nd April.
TIME OF SUPPLY FOR VOUCHERS
Vouchers are an instrument where there is an obligation to accept:
- It as consideration
- Part consideration for a supply of goods or services
For vouchers, the time of supply is the date of issue of voucher, if the supply is identifiable at that point. Else, the time of supply for vouchers is the date of redemption of voucher.
OTHER TYPES OF SUPPLY
In case, it is not possible to determine the time of supply under any of the methods mentioned above, the time of supply would be determined as under:
- In a case where a periodical return has to be filed, the date on which such return is to be filed.
- In any other case, be the date on which the tax is paid.
Time of Supply for Interest, Late fee or Penalty
The time of supply for any interest, late fee or penalty for delayed payment as an addition consideration for the supplies made, is the date on which the supplier receives such addition in value.
Time of Supply in case Change in rate of tax
When there is a change in rate of tax, the time of supply shall be determined in the following manner:
1. Supply is made before the change in rate of tax
- Invoice is issued and payment is also received after the change in rate of tax – the time of supply will be the date of invoice or the date of payment – whichever is earlier.
- Invoice is issued before the change in rate of tax and payment is received after the change in rate of tax – the time of supply will be the date of invoice.
- Payment is received before the change in rate of tax and the invoice is issued after the change in rate of tax – the time of supply will be the date of receipt of payment.
2. Supply is made after the change in rate of tax
- Payment is received after the change in rate of tax but the invoice is issued before the change in rate of tax – the time of supply will be date of receipt of payment.
- Invoice is issued and payment is also received before the change in rate of tax – the time of supply shall be the date of receipt of payment or data of invoice – whichever is earlier.
- Invoice is issued after the change in rate of tax but the payment is received before the change in rate of tax – the time of supply shall be date of invoice.
TAX APPLICABLE
IGST is a tax levied on all Inter-State supplies of goods and/or services and will be governed by the IGST Act. IGST will be applicable on any supply of goods and/or services in both cases of import into India and export from India.
Under IGST,
- Exports would be zero-rated.
- Tax will be shared between the Central and State Government.
EXAMPLE:
Consider that a businessman Rajesh from Maharashtra had sold goods to Anand from Gujarat worth Rs. 1,00,000. The GST rate is 18% comprised of 18% IGST. In such case, the dealer has to charge Rs. 18,000 as IGST. This IGST will go to the Centre.
QUESTION COVERED
Discuss the principles given under the Act to define the inter state supply?
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