Place of Supply rule of IGST sec-10

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GST is principally “Destination based tax” which means tax will charged based on ultimate destination of Goods. Section 10 of IGST Act also confirm the same in Sec-10(1)(a), which says.

“where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;”

But Sec-10(1)(b), has the different provision from stated above and this provision says the Place of supply will the location of Third party where the Goods move from one place other under instruction of third person, in such situation it is possible that Destination location of the Goods may not be the location of the Third person who has facilitated or instructed for the transaction.

In this situation question arise where Supplier supplying the Goods from one location to other location where Good are delivered to different location but the facilitator is in some other location, which GST and under whose GSTN he should charge the tax.

For Example Mr.X from Delhi place order with Mr.B of Maharashtra to deliver some Material at Mr.C at Chennai location which is franchise location of Mr.X, going by the provision of Sec-10(1)(b) Mr.B should treat Delhi as Place of Supply and should accordingly Bill To Mr.X charging IGST. Question may arise whether Mr.X will be eligible to take credit of this transaction as ultimate destination of tax is being different state i.e. Chennai in this Case.

As Sec-10(1)(b), says that :

Clarification should be given by the government on this matter as this may lead to litigation in future also the clarity is required by the government how the Place of supply should be determined where Goods are delivered to Branch location at the instruction of Head office.

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