GST

Integrated Goods and

(GOODS AND SERVICES TAX)

Services Tax
The introduction of Goods and Services Tax (GST) is a significant re- 4. The CST had following shortcomings:
form in the field of indirect taxes in our country. Multiple taxes levied (i) CST is collected and retained by the origin state, which is an
and collected by the Centre and States have been replaced by one aberration. Any indirect tax, by definition is a consumption tax,
tax called Goods and Services Tax (GST). GST is a multi-stage value the incidence of which is borne by the consumer. Logically, the
added tax on consumption of goods or services or both. tax should accrue to the destination State having jurisdiction
over such consumer.
2. A “dual GST”
A dual GST model has been adopted in view of the federal structure (ii) Input Tax Credit (ITC) of CST is not allowed to the buyer which
of our country. Centre and States will simultaneously levy GST on results in cascading of tax (tax on tax) in the supply chain.
every supply of goods or services or both which takes place within
(iii) Various accountable forms were required to be filed in CST viz, C
a State or Union territory. Thus, there shall be two components of
Form, E1, E2, F, I, J Forms etc. which adds to the compliance cost
GST as under: -
of the business and impedes the free flow of trade.
(i) Central tax (CGST) : (iv) Another negative feature of CST is the opportunity it provides
(levied & collected under the authority of CGST Act, 2017 passed by for “arbitrage” because of the huge difference between tax
the Parliament); and rates under VAT and CST being levied on intra-State sales and
inter-State sales respectively
(ii) State tax (SGST)
(levied & collected under the authority of SGST Act, 2017 passed by 5. The IGST model
the respective State); or The IGST model removes all these deficiencies. IGST is a mechanism
to monitor the inter-State trade of Goods and services and further
(ii) Union territory tax (UTGST) to ensure that the SGST component accrues to the destination /
(levied & collected under the authority of UTGST Act, 2017 passed by consuming State although the tax is paid in the originating State. It
the Parliament) maintains the integrity of Input Tax Credit (hereinafter referred to
as “ITC”) chain in inter-State supplies. The IGST rate is equal to CGST
3. Why the third tax in the name of IGST ? rate plus SGST/UTGST rate. IGST is levied by the Central Government
Before discussing the IGST Model and its features it is important to on all inter-State transactions of taxable goods or services.
understand how inter-State trade or commerce was regulated in the
erstwhile indirect tax system. It is significant to note that earlier the IGST rate= CGST rate + SGST/UTGST rate
Central Sales Tax Act, 1956 regulates the inter-State trade or com-
merce (hereinafter referred to as “CST”) the authority for which is GST
constitutionally derived from Article 269 of the Constitution. Further
as per article 286 of the Constitution of India, no State can levy sales
Sale Within Same State /
tax on any sales or purchase of goods that takes place outside the Union Territory Inter State Sale
State or in the course of the import of the goods into, or export of
the goods out of, the territory of India. Only Parliament can levy tax
on such transactions. The Central Sales Tax Act was enacted in 1956 CGST SGST / UTGST IGST
to formulate principles for determining when a sale or purchase of
goods takes place in the course of inter-State trade or commerce. 6. Prescribed order of utilization of IGST/CGST/SGST credit
The Act also provides for the levy and collection of taxes on sale of The IGST payment can be done by utilizing ITC. The amount of ITC
goods in the course of inter-State trade. on account of IGST is allowed to be utilized first towards payment of
IGST and balance for payment of CGST, SGST and UTGST in any order.
It has additionally been provided that the IGST balance in the elec-
tronic credit ledger needs to be exhausted before using any CGST,
SGST or UTGST balance for payment of any outward tax liability.

Directorate General of Taxpayer Services

CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS
www.cbic.gov.in
 GST
Integrated Goods and
(GOODS AND SERVICES TAX)

Services Tax
7. Nature of Supply 8. Location of Supplier
It is very important to determine the nature of supply – whether it Broadly is the registered place of business or the fixed establishment
is inter-State or intra- State, as the type of tax to be paid (IGST or of the supplier from where the supply is made. It has to be either
CGST+SGST) depends on that. regular place of business or fixed establishment which is having suf-
ficient degree of permanence and suitable structure in terms of hu-
(i) Inter-State Supply: man and technical resources.
Subject to place of supply provisions, where the location of the sup-
plier and the place of supply are in– 9. Place of supply
(a) two different States;
(b) two different Union territories; or 9.1 Place of supply provisions have been framed for goods & ser-
(c) a State and a Union territory vices keeping in mind the destination/consumption principle. In oth-
Such supplies shall be treated as a supply of goods or services in the er words, place of supply is based on the place of consumption of
course of inter-State trade or commerce. goods or services. As goods are tangible, the determination of their
place of supply based on the consumption principle is not difficult.
Any supply of goods or services in the taxable territory, not being Generally, the place of delivery of goods becomes the place of sup-
an intra-State supply shall be deemed to be a supply of goods or ser- ply. However, the services being intangible in nature, it is not easy to
vices in the course of inter-State trade or commerce. Supplies to or determine the exact place where services are acquired, enjoyed and
by SEZ are defined as inter-State supply. Further supply of goods ex- consumed. In respect of certain categories of services, the place of
ported out of India or imported into territory of India, till they cross supply is determined with reference to a proxy.
the customs frontiers of India or supply of services imported into the
territory of India or exported out of India shall be treated as supplies 9.2 A distinction has been made between B2B (Business to Busi-
in the course of inter-State trade or commerce. Even supplies to in- ness) & B2C (Business to Consumer) transactions as B2B transac-
ternational tourists are to be treated as inter-State supplies. tions are those transactions on which ITC is availed by the registered
person (recipient) and no real revenue accrues to the Govt., except
(ii) Intra-State supply: the tax paid in cash. In some cases, however, the registered recipient
It has been defined as any supply where the location of the supplier may not be eligible for ITC although the transaction would be B2B
and the place of supply are in the same State or Union territory. transaction.

Thus, the nature of the supply depends on the location of the sup-
plier and the place of supply. Both these terms have been defined in 9.3 Separate provisions for supply of goods and services have been
the IGST Act. made for determination of their place of supply. Separate provisions
for determination of place of supply in respect of domestic supplies
and cross border supplies have been framed.
• Supply of goods within the State or Union Territory.
Intra-State
• Supply of services within the State or Union Terri-
supply
tory
• Supply of goods from one State or Union Territory
to another State or Union Territory
• Supply of service from one State or Union Territory
to another State or Union Territory
• Import of goods till they the cross customs frontier
Inter-State
• Import of service
supply
• Export of goods or service
• Supply of goods/services to/by SEZ
• Supplies to international tourists
• Any other supply in the taxable territory which is
not intra-State supply

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 GST
Integrated Goods and
(GOODS AND SERVICES TAX)

Services Tax
A. Place of supply of goods other than import and export
S. No. Nature of Service Place of Supply
(Section-10)
1. (i) Immovable proper- (i) Location at which the immov-
S. No. Nature of Supply Place of Supply ty related to services, able property or boat or vessel is
1. Where the supply involves Location of the goods including hotel accom- located or intended to be located
movement of goods, whether at the time at which the modation and in proportion to the number
by the supplier or the recipient movement of goods of nights stayed in such property If
(ii) Accommodation located outside India: Location of
or by any other person terminates for delivery
by a house boat or any the recipient
to the recipient
other vessel and ser-
2. Where the goods are deliv- The principal place of vices ancillary to such (ii) In proportion to the time
ered to recipient or any per- business of such person services spent by the boat or vessel in
son on the direction of third each such State or Union territory
person by way of transfer of
2. Restaurant and catering Location where the services are
title or otherwise, it shall be
services, personal actually performed
deemed that third person has
grooming, fitness, beauty
received the goods
treatment, health service
3. Where there is no movement Location of such goods
3. Training and perfor- B2B: Location of such registered
of goods either by supplier or at the time of delivery
mance appraisal person
recipient to recipient
B2C: Location where the services
4. Where goods are assembled The place where the are actually performed
or installed at site goods are assembled or
4. Admission to an event Place where the event is actually
installed
or amusement park held or where the park or such
5. Where the goods are supplied The place where such other place is located
on board a conveyance, like goods are taken on
5. Organisation of B2B: Location of such registered
vessel, aircraft, train or motor board the conveyance
an event person
vehicle
B2C: Location where the event is
6. Where the place of supply of It shall be determined in actually held
goods cannot be determined such manner as may be In case of multi-state event - By ap-
prescribed plication of the generally accepted
accounting principles
If event is held outside India: Loca-
B. Place of supply of goods in case of Import & Export
tion of the recipient
(Section-11)
6. Transportation of B2B: Location of such registered
S. No. Nature of Supply of Place of Supply goods including mails person
Goods B2C: Location at which such goods are
1. Import Location of importer handed over for their transportation
2. Export Location outside India
C. Place of supply of services in case of Domestic Supplies (Sec- Following proviso clause has been added to section 12(8) vide
tion12) (Where the location of supplier of services and the location the IGST (Amendment) Act, 2018 so as to change the place of
of the recipient of services is in India) supply from location of recipient to destination of goods, if the
transportation is to a place outside India.
(i) In respect of following 12 categories of services, the place of
supply is determined with reference to a proxy. Rest of services
are governed by a default provision. “Provided that where the transportation of goods is to a place
outside India, the place of supply shall be the place of destination
(ii) For the rest of the services other than those specified above, a of such goods.”
default provision has been prescribed as under:
This has come into force w.e.f. 01.02.2019 vide Notification no.
01/2019-Integarted Tax dated 29.01.2019.

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 GST
Integrated Goods and
(GOODS AND SERVICES TAX)

Services Tax
S. No. Nature of Service Place of Supply Default Rule for the services other than the 12 specified ser-
7. Passenger transpor- B2B: Location of such registered vices
tation person S. Description Place of Supply
B2C: Place where the passenger No. of Supply
embarks on the conveyance for a
continuous journey 1. B2B Location of such Registered Person

8. Services on board a Location of the first scheduled 2. B2C (i) Location of the recipient where the
conveyance point of departure of that convey- address on record exists
ance for the journey (ii) Location of the supplier of services in
other cases
9. Telecommunication Services involving fixed line, circuits,
services Leased cir- dish etc., place of supply is location D. Place of supply of services in case of cross-border supplies: (Sec-
cuits- where the leased of such fixed equipment. In case of tion 13)
circuit is installed in mobile/ internet post-paid services, Where the location of the supplier of services or the location of the
more than one State it is location of billing address of the recipient of services is outside India
or Union territory and recipient. In case of sale of pre-paid
a consolidated amount voucher, place of supply is place of (i) In respect of following category of services, the place of sup-
is charged sale of such vouchers. In other cases, ply is determined with reference to a proxy. Rest of the services are
governed by a default provision.are governed by a default provision.
it is address of the recipient in records
In proportion to the number of points
lying in the State or Union territory
S. No. Nature of Service Place of Supply
10. Banking and other Location of the recipient of 1. i. Services supplied in respect i. The location where
financial services services on the records of the of goods that are required to the services are actually
supplier be made physically available performed
Location of the supplier of services ii. From a remote location by ii. The location where
if the location of the recipient of way of electronic means,
(Not Applicable in case of goods are situated
services is not available
goods that are temporarily
11. Insurance services B2B: Location of such registered imported into India for repairs
person and exported.)
B2C: Location of the recipient of
services on the records of the A phrase “or for any other treatment or process” has also been added
supplier to repairs above. Following proviso clause substituted-
12. Advertisement i. The place of supply shall be taken as
services to the Gov- located in each of such States and in “Provided further that nothing contained in this clause shall apply in the
ernments, a statu- case of multiple states, in proportion to case of services supplied in respect of goods which are temporarily im-
tory body or a local value, as may be determined in terms of ported into India for repairs or for any other treatment or process and
authority. contract or agreement are exported after such repairs or treatment or process without being
ii. In the case of advertisements over put to any use in India, other than that which is required for such repairs
internet, the service shall be deemed to or treatment or process;”.
have been provided all over India, and
the amount attributable to the value of This has come into force w.e.f. 01.02.2019 vide Notification no. 01/2019-In-
advertisement service shall be calculated tegarted Tax dated 29.01.2019.
on the basis of the internet subscribers in
such State or Union territory S. No. Nature of Service Place of Supply
2. Services supplied to an individual The location where the
which require the physical pres- services are actually
ence of the receiver performed
3. Immovable property related Location at which the
services including hotel immovable property is
accommodation located

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 GST
Integrated Goods and
(GOODS AND SERVICES TAX)

Services Tax
S. No. Nature of Service Place of Supply Export of services Import of services
4. Admission to or organisa- The place where the event means the supply of any service where means the supply of
tion of an event is actually held i. the supplier of service is located in any service, where
5. Banking, financial institu- Location of the supplier of India i. the supplier of
tions, NBFC Intermediary service ii. the recipient of service is located service is located
services, hiring of vehicles outside India outside India
services etc iii. the place of supply of service is out- ii. the recipient of
side India service is locat-
6. Transportation of goods The place of destination iv. the payment for such service has been ed in India, and
of the goods received by the supplier of service in iii. the place of
7. Passenger transportation Place where the passen- convertible foreign exchange, or in supply of service
ger embarks on the con- Indian currency where permitted by is in India
veyance for a continuous the RBI and
journey v. the supplier of service and recipient of
8. Services on board a con- The first scheduled point service are not merely establishments
veyance of departure of that con- of a distinct person in accordance with
veyance for the journey explanation 1 of section 8

9. Online information and The location of recipient

database access or retrieval of service 12. Zero rated supply
services Exports and supplies to SEZ are considered as ‘zero rated supply’ on
which no tax is payable. However, ITC is allowed subject to such con-
ditions, safeguards and procedure as may be prescribed. Refund in
respect of such supplies may be claimed by following either of these
(ii) For the rest of the services other than those specified above, a options:
default provision has been prescribed as under.
(i) Supply made without payment of IGST under Bond and claim
refund of unutilised ITC or
Default Rule for the cross border supply of services other than (ii) Supply made on payment of IGST and claim refund of the same
nine specified services
13. Refund of integrated tax paid on supply of goods to tourist leav-
S. Description Place of Supply
ing India
No. of supply Section 15 of the IGST Act provides for refund of IGST paid to an in-
1. Any Location of the Recipient of Service ternational tourist leaving India on goods being taken outside India
If not available in the ordinary course of subject to such conditions and safeguards as may be prescribed. An
business: The location of the supplier of international tourist has been defined as a non-resident of India who
service enters India for a stay of less than 6 months. IGST would be charged
on such supplies as the same is in the course of export.

The date of bringing this Section into force will be notified at a later
10. Supplies in territorial waters date once the ecosystem for the same is ready. A scheme, howev-
Where the location of the supplier is in the territorial waters, the lo- er, for tax free supply of indigenous goods to international tourist
cation of such supplier; or where the place of supply is in the terri- against foreign exchange by Duty Free Shops / Duty Paid Shops
torial waters, the place of supply is be deemed to be in the coastal established at departure area of international airport beyond immi-
State or Union territory where the nearest point of the appropriate gration counters has been brought into force w.e.f. 01.07.2019 vide
baseline is located. Circular No. 106/25/2019-GST dated 29.06.2019.

11. Export / Import of services

A supply would be treated as Import or export if certain conditions
AC

are satisfied. These conditions are as under:

T

IGST
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