Frequently asked questions.

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General Questions

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A “Dual GST” model has been adopted in view of the federal structure of our country. Centre and States will simultaneously levy GST on every supply of goods or services or both which, takes place within a State or Union Territory. Thus, there shall be two components of GST:

(i) Central tax (CGST) (Levied & collected under the authority of CGST Act, 2017 passed by the Parliament)

(ii) State tax (SGST) (Levied & collected under the authority of the State Government.

(i) CST is collected and retained by the origin State, which is an aberration. Any indirect tax, by definition, is a consumption tax, the incidence of which, is borne by the consumer. Logically, the tax must accrue to the destination State having jurisdiction over the consumer.

(ii) Input Tax Credit (hereinafter referred to as ITC) of CST is not allowed to the buyer which, results in cascading of tax (tax on tax) in the supply chain.

(iii) Various accounting forms are required to be filed in CST vis., C Form, E1, E2, F, I, J Forms etc. which add to the compliance cost of the business and impedes the free flow of trade.

(iv) Another negative feature of CST is the opportunity for “arbitrage” because of the huge difference between tax rates under VAT and CST being levied on intra-State sales and inter- State sales respectively.

IGST is a mechanism to monitor the inter-State trade of goods and services and ensure that the SGST(WBGST) component accrues to the consumer State. It would maintain the integrity of ITC chain in inter-State supplies. The IGST rate would broadly be equal to CGST rate plus SGST rate. IGST would be levied by the Central Government on all inter-State transactions of taxable goods or services. 

The IGST payment can be done by utilising the ITC. The amount of ITC on account of IGST is allowed to be utilised towards the payment of IGST, CGST and SGST, in that order.

Any supply of goods or services in the taxable territory, not being an intra-State supply, shall be deemed to be a supply of goods or services in the course of inter-State trade or commerce. Supplies to or by SEZs are defined as inter-State supply. Further, the supply of goods imported into the territory of India till they cross the customs frontiers of India or the supply of services imported into the territory of India shall be treated as supplies during inter-State trade or commerce. Also, the supplies to international tourists are to be treated as inter-State supplies.

It is very important to determine the nature of supply – whether it is inter-State or intraState, as the kind of tax to be paid (IGST or CGST+SGST) depends on that. The nature of the supply depends on the location of the supplier and the place of supply. Both these terms have been defined in the IGST Act.

Places of supply provisions have been framed for goods and services, keeping in mind the destination/consumption principle. In other words, the place of supply is based on the place of consumption of goods or services. As goods are tangible, the determination of their place of supply, based on the consumption principle, is not difficult. Generally, the place of delivery of goods becomes the place of supply. However, the services being intangible in nature, it is not easy to determine the exact place where services are acquired, enjoyed and consumed. In respect of certain categories of services, the place of supply is determined with reference to a proxy.

Intra-state supply has been defined as any supply where the location of the supplier and the place of supply are in the same State or Union Territory.

Intra-state supply includes:

Supply of goods within the same State or Union Territory.

Supply of services within the same State or Union Territory.

Inter-State supply includes:

• Supply of goods from one State or Union Territory to another State or Union Territory 

• Supply of services from one State or Union Territory to another State or Union Territory • Import of goods till they the cross customs frontier

• Import of services

• Export of goods or services • Supply of goods/services to/by SEZ

• Supplies to international tourists • Any other supply in the taxable territory which is not intra-State supply

Broadly, it is the registered place of business or the fixed establishment of the supplier from where the supply is made. Sometimes, a service provider has to go to a client location to provide service. However, such a place would not be considered as the location of the supplier. It has to be either a regular place of business or a fixed establishment, which has a sufficient degree of permanence and suitable structure in terms of human and technical resources.

What is the difference between the nature and place of supply?

 

NATURE OF SUPPLY

PLACE OF SUPPLY

Where the supply involves the movement of goods, whether by the supplier or the recipient or by any other person

Location of the goods at the time at which, the movement of goods terminates for delivery to the recipient

Where the goods are delivered to the recipient, or any person on the direction of the third person by way of transfer of title or otherwise, it shall be deemed that the third person has received the goods

The principal place of business of such person

Where there is no movement of goods either by supplier or recipient

Location of such goods at the time of delivery to the recipient

Where goods are assembled or installed at site

The place where the goods are assembled or installed

Where the goods are supplied on-board a conveyance like a vessel, aircraft, train or motor vehicle

The place where such goods are taken on-board the conveyance

Where the place of supply of goods cannot be determined in terms of subsections (2), (3), (4) and (5)

It shall be determined in such manner as may be prescribed

Section 11 of IGST Act states that in case of import, the place of supply is location of importer and in case of export, the place of supply is location outside India.

Where the location of the supplier is in the territorial waters, the location of such supplier, or where the place of supply is in the territorial waters, the place of supply is deemed to be in the coastal State or Union Territory where the nearest point of the appropriate baseline is located.

Export of services means the supply of any service, where

(a) the supplier of service is located in India,

(b) the recipient of the service is located outside India,

(c) the place of supply of service is outside India,

(d) the payment for such service has been received by the supplier of service in convertible foreign exchange, and

(e) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with explanation 1 of section 8.

Import of services means the supply of any service, where

(a) the supplier of service is located outside India,

(b) the recipient of the service is located in India, and

(c) the place of supply of service is in India

Exports and supplies to SEZs are considered as ‘zero rated supply’ on which no tax is payable. However, ITC is allowed, subject to such conditions, safeguards and procedure as may be prescribed, and refunds in respect of such supplies may be claimed by following either of these options:

(i) Supply made without the payment of IGST under Bond and claim refund of unutilised ITC or

(ii) Supply made on payment of IGST and claim refund of the same

Yes. Section 15 of the IGST Act provides for refund of IGST paid to an international tourist leaving India on goods being taken outside India, subject to such conditions and safeguards as may be prescribed. An international tourist has been defined as a non-resident of India who enters India for a stay of less than 6 months. IGST would be charged on such supplies as the same in the course of export.

 

 

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