GST and Place of Supply

[Kaustubh Karandikar]

XYZ (Mumbai, India) had received an order from PQR(USA) towards supply of goods. The purchase order will be issued by PQR(USA) and payment will be received by XYZ(India) from PQR(USA) in foreign currency. However, as per the instructions of PQR(USA), the goods are to be physically delivered by XYZ to a third-party contract manufacturer based in Pune. 1) Whether XYZ is required to pay GST on this transaction since the buyer is outside India? 2) if yes, whether IGST or CGST + SGST?

[KASTURI SETHI]

Dear Sir,

In this scenario, the goods did not leave India physically. Hence this transaction does not conform to Section 2(5) of IGST Act. It does not amount to export in terms of Section 2(5) of IGST Act. It is intra-State supply under Section 8(1) of IGST Act. So CGST and SGST applicable. Also see the decision of AAR-Karnataka reported as 2020 (5) TMI 604 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA

[Shilpi Jain]

Agree. Section 10(1) (b) oft the IGST Act will not be applicable as the third person (PQR) in this case is not in India and not registered under gst.

[Kaustubh Karandikar]

Respected Kasturi and Shilpi ji

In my view, since the buyer is outside India, place of supply will be treated as inter - state and IGST needs to be charged. Your kind views please. Kasturi ji: I will be obliged if you can share the AAR ruling you have quoted since i am not able to lay my hands on it.

[KASTURI SETHI]

Dear Sir,

Relevant decision of AAR Karnataka is posted pl.

2020 (5) TMI 604 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA - IN RE : DOLPHIN DIE CAST (P) LTD.

 

[Shilpi Jain]

The section 10 1 (b) referred to in my reply in case of bill to ship to transaction, the place of supply would be the principal place of business of the third person, that is the person who is placing the order.

In your case the person placing the order does not have any registration in India and thereby there is no principal place of business. so this provision fails and PoS would be location of delivery of goods to the recipient

AI Summary

Place of supply: goods delivered in India to a contract manufacturer treated as intra State supply, CGST and SGST apply.
Where goods ordered by a foreign buyer are physically delivered within India to a domestic contract manufacturer, the transaction is not export and is an intra State supply liable to CGST and SGST. Section 10(1)(b) of the IGST Act does not apply if the ordering party lacks an Indian registration or principal place of business, so the place of supply is the delivery location in India.