CGST and SGST applicable in Inter State Transaction or payment in another State
Place of supply means place at which supply is made. Section 9 of CGST Act, 2017 provides for Levy and collection of CGST and SGST. It says that CGST and SGST would be applicable on all Intra-state supplies taxable under Goods and Service Tax. This article contains cases where supply is provided to the another state person but in place of IGST, CGST and SGST will be charged.
What do you mean by Intra State Supply?
If Location of Supplier and Place of Supply are in same state or same union territory then it shall be treated as Intra State supply, subject to section 10 of IGST Act (i.e. place of supply of goods).
However, following supplies are not considered as Intra State Supply even if they are in same state or same union territory-
- Supply of goods and services to or by SEZ developer or SEZ unit.
- Goods imported into India.
- Supplies made to a Tourist.
Following are some of the examples to identify Intra State Supply.
Place of Supply in case of supplies related to immovable property
The place of supply of service will be the location of Immovable property or boat or vessel in the following cases-
1. Directly in relation to Immovable property including services provided by interior decorators, architects, engineers, estate agents for such Immovable property and its ancillary services.
Example, If Mr. Bachchan gets registered under GST in Gujarat, purchases any commercial immovable property in Rajasthan and also receive services of interior decorators then in such case both the seller of immovable property and the Interior decorator service provider would charge CGST and SGST in their invoices, as in this case place of supply and location of supplier are in the same state.
2. Accommodation in any immovable property for marriage or social, religious, cultural or business function and its ancillary services. Accommodation in a Hotel, Inn, Guest house, Home stay, Club or camp site including a house boat or any vessel and its ancillary services.
For example, If Mr. BabaTax have registered under GST in Rajasthan goes to Mumbai for any meeting and thereby books a hotel then in such a case place of supply and location of supplier would be in the same state and accordingly supplier would charge CGST and SGST.
3. In case of goods where supply involves Installation or Assembly of goods, the place of supply would be the location of such Installation or Assembly.
For eg, Mr. A (registered in New Delhi) purchases a machine from Mr. B (registered in Maharashtra) for being installed in factory at Mumbai, then the place of supply would be Mumbai and location of supplier would also be Mumbai resulting in levy of CGST and SGST.
Note: In case, if immovable property is outside India then place of supply would be location of recipient and hence, IGST would be charged as place of supply and location of supplier is not in same state.
Place of Supply in case of SEZ
Now, the important aspect to be covered is with respect to Services of accommodation, conferencing, banqueting, etc. provided to a (Special Economic Zone) SEZ developer or SEZ unit.
As per section 7(5) of IGST Act, Supply of goods or services to and by SEZ unit or developer shall be treated to be supply in course of Inter State.
And as per section 12(3) of IGST Act, the place of supply of service by way of accommodation in any immovable property for organizing any functions shall be the location at which such immovable property is located. Thus, if location of supplier and place of supply is in same state then it would be Intra state supply.
Question that arises here is whether CGST and SGST would be charged or IGST would be charged?
Thus, in such cases specific provision shall prevail which is in section 7(5) making it Inter State Supply and therefore IGST would be charged in such case.
Place of Supply in case of services
- In case of Restaurant and Catering services, personal grooming, fitness, beauty treatment, health services including cosmetic and plastic surgery, the place of supply would be the place where such services are actually performed.
For instance, Mr. Adani, a businessman from Ahmedabad dines at a restaurant in Mumbai while on a business trip. Thus, the place of supply would be Mumbai and the location of supplier is also Mumbai resulting into levy of CGST and SGST.
- Place of Supply in case of services by way of admission to any events and amusement park and other places would be the place where such event is actually held or where such park is located.
For example, Mr. B of New Delhi buys a ticket of an amusement park located in Uttar Pradesh (UP) for its employees. In such case, place of supply is UP and the location of supplier is also UP resulting into CGST and SGST.
- In cases of services, where the services are provided to any unregistered dealer and their location is not available then the location of service provider will be the place of provision of service.
Will the Input Tax credit be available to recipient?
Let us first understand the system of utilization of credit. Credit of input CGST and SGST paid in the state of registration would only be available for payment against output CGST and SGST of the same state. The GST rules says that CGST and SGST is charged in case of Intra state supply only and IGST would be charged in case of inter State supply.
This is mainly done from the view point of states. As if the place of supply and location of supplier are in the same state then CGST and SGST would be charged irrespective of Customer registration State.
Thus, even if customer is registered in other state then also CGST and SGST would be charged assuming other conditions are satisfied. As a result, no credit shall be available for input tax paid in any other state. As it will be not transferrable to the state of registration.
The author of above article is CA Rahul Gaur
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