Place of supply for a registered person got delivered goods to its worksite in another state .

[KALLESHAMURTHY MURTHY K.N.]

A firm in the business of civil works contracts registered in Karnataka only, undertakes works contracts in Tamilnadu, procuring construction materials in Tamilnadu itself and got delivered to the worksite in Tamilnadu. Tamilnadu suppliers have issued tax invoices for IGST and are also charging CGST & SGST. The firm has availed of the ITC of such tax in Karnataka and declared output tax under IGST. Is this the correct procedure with respect to the tax invoice issued by the suppliers for the goods delivered in Tamilnadu charging IGST in terms of place of supply? Since works contract executed in Tamilnadu is the output tax not liable to Tamilnadu.

[Sadanand Bulbule]

Levy of IGST on the outward works contract is sustainable only where the supply is legitimately effected from the Karnataka registration and no obligation arises to obtain registration in Tamil Nadu. However, if the nature and execution of the contract requires registration in Tamil Nadu (for instance, due to a fixed establishment or site presence), the transaction assumes the character of an intra-State supply in Tamil Nadu and must accordingly be subjected to CGST and Tamil Nadu SGST, and not IGST.

 

[Raam Srinivasan Swaminathan Kalpathi]

Respected Sir

As pointed out by respected Sri.Sadanandji if the RP has an establishment in TN, then it would be better take registration there and avail ITC of CGST and SGST. If the RP has no permanent establishment in TN then the service provides to the RP must charge IGST and I am of the opinion that ITC cannot be denied to the RP. IMHO, POS must be viewed from the limited prism of whether to collect CGST/ SGST or IGST.

Thanks

[KALLESHAMURTHY MURTHY K.N.]

Sri Kalpathi Sir,

When the supply of service (works contract) undertaken by the RP in Tamilnadu procuring goods in Tamilnadu itself, in my view, the place of supply would be where the goods are terminated, suppliers are required to raise tax under CGST & SGST, and the RP cannot take ITC in Karnataka. For example, a hotelier in Delhi supplies room service to an RP from Haryana. The hotelier must issue a tax invoice for CGST & SGST, and so RP cannot take ITC. Hence, more clarity is requested on the above issue.

[Raam Srinivasan Swaminathan Kalpathi]

Respected Sir

As regards hotel stay in another state, the issue is still nebulous and the GST Council is yet to clarify. Nonetheless, there is a specific provision in Sec.12(3) covering this type of supply. Yes, I agree that Hoteliers only collect CGST and SGST and mention the recipients address of anotther state in their supply invoice. The net result is the service recipients legitimate ITC going abegging. Let us hope that better sense will prevail in course of time.

Coming to the issue at hand, I am of the view that as the recipient of goods does not possess an establishment in the State where the WC is being executed, the transactions of these type will squarely fall under the category of Bill to Ship to model. The suppliers must make a Bill to Ship to invoice with IGST imputed under the cover of e-way bill and deliver the goods at your clients site. Shelter can be had under Section 10(1)(ca) of the IGST Act, 2017.

Experts may please correct my understanding. Thanks

[Shilpi Jain]

In case of goods supplied the vendors could charge IGST, but in case any services received, they would charge only C+S since its an immovable property related transaction.

[Shilpi Jain]

Ideally in these type of situations, it is best to take registration TN, complete all compliances and close

AI Summary

Place of supply rules decide whether IGST or CGST and SGST apply to goods delivered to out of state worksites. Place of supply for goods delivered to an out of State worksite controls whether suppliers charge IGST or CGST and SGST, affecting the recipient's ITC. If supply is legitimately effected from the supplier's registration outside the worksite State and the recipient lacks an establishment there, invoices with IGST may be appropriate; if the contract's execution or a fixed establishment triggers registration in the worksite State, the supply is intra State and must bear CGST and SGST. The bill to ship to model and Section 10(1)(ca) of the IGST Act are cited in support of IGST invoicing.