Place of Supply Conundrum under GST Law has opened floodgates of demand and litigation for Importers and Exporters as Section 22 of CGST Act, 2017, which is statutory provision for the Registration under GST, mandates that every supplier is liable to be registered in the State from where he makes a taxable supply of goods or services or both if his taxable turnover in a financial year extends twenty lakh rupees.
Hence when an Importer located in Chandigarh imports goods at Mundra Port in Gujarat and decides to dispose the goods from Gujarat itself(without bringing the goods to Chandigarh); he is required to get himself registered in Gujarat and is required to pay CGST + SGST under Gujarat GST Registration. The Law requires registration to be taken by the supplier in the State from which movement of goods is originating. The Importer has no option to bill such supply from his Chandigarh Registration as goods are being supplied by him from Gujarat only. In this scenario; the Importers importing goods at various Ports and disposing the goods from Port State itself need to obtain multiple registration numbers in every State from which supply is being made by them. However, in case the goods are being brought to the State where the importer is registered and the Supply of goods is originating from the said State; the goods can be supplied under GST Regime of said State.
Merchant Exporters who are procuring export goods from another State and where the goods are directly moving to Port of Export are also required to obtain GST Registration in the State from which goods are being supplied for Export. For example; if Merchant Exporter based in Chandigarh is procuring the goods from Manufacturer located in Maharashtra and the goods are directly moving from the factory of Manufacturer to Nhava Sheva Port for Export; the Merchant Export is required to obtain Registration in Maharashtra as the supply of goods for export is being made from Maharashtra. This situation is not covered under special provision of “Bill to Ship to” which is allowed under domestic supply in terms of Section 10 of IGST Act, 2017.
Section 10 ( 1) ( b) of IGST Act, 2017 has a deeming provision which provides that 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. But Section 10(1) is applicable for determining the place of supply of goods , other than supply of goods imported into, or exported from India. Further, even otherwise when the goods are being exported out of India; the manufacturer is not delivering the goods to the Foreign Buyer and it is not a case of delivery of goods to a recipient or any other person.
Importers and Merchant Exporters need a cautious planning in GST Regime as non-compliance with mandatory statutory provisions can not only lead to denial of input credit which is allowed only on receipt of goods of goods but also denial of Refund in case goods are exported on payment of IGST or input credit refund is claimed. The receipt of goods in a State where a Company is not registered under GST will be treated as receipt of goods by a distinct person under GST Law even if registration is not obtained by the said Company in said State. Section 25(4) of CGST Act, 2017 is very specific on this aspect that a person who is required to obtain more than one registration, in more than one State or Union Territory shall, in respect of each registration, be treated as distinct persons for the purposes of the Act.
The determination of place of supply under GST Law is biggest challenge for every company. But at the same time it has opened the floodgates for litigation. It is no more Good and Simple Tax and even most of Consultants are struggling with the legal provisions which are yet to be interpreted by the Courts. But GST has opened opportunities for all. Many Consultants who were projecting themselves as Transfer Pricing Expert on Linkedin for last several years have changed their Profile as GST Expert.
by RS Sharma, Advocate.
He is the Managing Partner of Law Firm RS Sharma Associates.
He is advising several MNCs and Indian Corporates on GST issues, you can reach him on firstname.lastname@example.org