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Under GST, the existing system of levy of tax on manufacture, provision of taxable services, and sale of goods will be replaced by the concept of ‘Supply’. It is very important, therefore, to understand the “place of supply” meaning in determining the right charge of tax on supply.
There are two important components that determine the tax to be charged on a supply:
In an intra-state supply, the taxes to be charged are CGST and SGST.
In an interstate supply, the tax to be charged is IGST. The following are also treated as interstate supplies:
When a supply involves movement of goods, the place of supply is the location at which the movement of goods terminates for delivery to the recipient.
In the Bill to – Ship to model, the billing and shipping of goods are done to two states and entities. In order to avoid the cascading of multiple taxes through the course of the transaction, the first sale will be taxable, and any subsequent sale during the movement of goods is exempt from tax.
Under GST, the place of supply of goods is very critical to determine the transaction as interstate or intrastate. Accordingly, the applicable taxes can be levied. In GST, if the goods are supplied by the supplier to the recipient on the direction of a third person, it will be deemed that the third person has received the goods, and the place of supply will be the principal place of business of such third person.
Under GST, place of supply of services will determine the type of tax applicable on the service. This is based on the concept of GST being a ‘destination based consumption tax’, where tax will accrue to the State where the supply is consumed.
The rules for determining the place of supply of services are different from the rules for determining the place of supply of goods. In case of goods, the movement of goods largely decides the place of supply. Services, being intangible, have no fixed manner of delivery. Also, in certain cases of supply of service, the location of the supplier and/or recipient may not be fixed or even ascertainable. It is thus important for businesses to evaluate the place of supply in GST with example, to understand the subject better.
In the GST regime, the place of supply must be determined to identify the type of GST to be charged. When a taxable service is supplied to a registered person (regular/composition dealer), the registered place of business of the recipient will be the place of supply.
When a service is supplied to a registered person in a different state, the tax applicable is IGST.
In the GST regime, when a service is supplied to an unregistered person, there can be 2 scenarios:
When a service is supplied to an unregistered person whose address exists in the supplier’s records, the place of supply will be the location of the recipient in the supplier’s records.
When a service is supplied to an unregistered person whose address does not exist in the supplier’s records, the place of supply will be the location of the supplier
In case of services supplied in relation to an immovable property, specific rules have been laid down for determining the place of supply. These rules override the general rules for determining the place of supply of services. Place of supply of services provided in relation to an immovable property will be the location at which the immovable property is located or intended to be located.
There can be four scenarios for this:
|Type of Service||Type of Recipient||Place of Supply|
|Restaurant and catering services||Not applicable||Location where the service is rendered|
|Personal grooming, fitness, beauty treatment and health services, including cosmetic and plastic surgery||Not applicable|
|Services in relation to training and performance appraisal||Registered person||Location of the recipient|
|Unregistered person||Location where the service is rendered|
|Services provided through admission to a cultural, artistic, sporting, scientific, educational or entertainment event or amusement park||Not applicable||Location where the event is held|
|Services provided through organisation of a cultural, artistic, sporting, scientific, educational or entertainment event||Registered person||Location of the recipient|
|Unregistered person||Location where the event is held|
|Services provided using fixed telecommunication line, leased circuits, internet leased circuits, cable or dish antenna||Not applicable||Location where the telecommunication line, leased circuit, cable connection or dish antenna is installed|
|Post-paid mobile connection||Not applicable||Billing address of the recipient on the records of the supplier|
|Prepaid mobile connection||Not applicable||When supplied by a selling agent/re-seller/distributor of the supplier : Address of the selling agent /re-seller/distributor as per the records of the supplier at the time of supply|
|Not applicable||When recharge is done through internet banking or other electronic modes of payment : Location of the recipient in the records of the supplier|
|Insurance services||Registered person||Location of the recipient|
|Unregistered person||Location of the recipient in the records of the supplier|
|Banking and other financial services||Not applicable||Location of the recipient in the records of the supplier|
|If the location of the recipient is not in the records of the supplier, place of supply will be the location of the supplier|
|Transportation of goods||Registered Person||Location of the recipient|
|Unregistered person||Location at which the goods are handed over for transportation|
|Transportation of passengers||Registered Person||Location of the recipient|
|Unregistered person||Place where the passenger embarks on the conveyance for a continuous journey|
|Services supplied on board a conveyance||Not applicable||Location of the first scheduled point of departure of the conveyance for the journey|
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