GST

How to Determine the Place of Supply of Transportation Services

Under Goods and Services Tax (GST), ‘supply’ will be the single taxable event and the major transformation that will occur is ‘Destination based consumption tax’, where tax will accrue to the state in which the supply is consumed. The place of supply determines the tax type to be levied on the supply.

Let us have a look at the importance of an accurate determination of place of supply for businesses. The reasons for the same are as follows:

  • Wrong classification of supply between interstate or intrastate and vice versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of CGST Act.
  • Refund will have to be claimed by the taxpayer where wrong taxes have been paid on the basis of the wrong classification.
  • The taxpayer will have to pay the correct tax along with interest for delay on the basis of revised or correct classification.
  • Correct determination of place of supply helps to know the incidence of tax.

Though general rules to determine the place of supply of services are formulated, specific rules have been laid down to determine the place of supply of many services. Let’s evaluate how to determine the place of supply of transportation services.

Transportation services are of 3 types:

  • Transportation of Goods
  • Transportation of Passengers
  • Services Supplied On Board for Conveyance

Let us see how to determine the place of supply in case of each of these services.

Service Type

Recipient Type

Place of supply

Example

Transportation of Goods Registered Person Location of the Recipient ANR Transports, a goods transportation company based in Tamil Nadu, provides transportation services to Caterpillar India Pvt. Ltd., an automobile manufacturer, registered in Tamil Nadu.

Location of supplier: Tamil Nadu

Place of supply: Tamil Nadu

It is an intrastate supply and the applicable taxes are CGST and SGST.

Unregistered Person Location at which the goods are handed over for transportation Vaishnavi Enterprises, a courier agency registered in Maharashtra, provides courier services to an unregistered customer, Aswin, in Karnataka, to deliver documents from Maharashtra to Karnataka.

Location of supplier: Maharashtra

Place of supply: Maharashtra

It is an intrastate supply and the applicable taxes are CGST and SGST

Transportation of Passengers Registered Person Location of the Recipient The Arvind Store, registered in Gujarat, purchase flight tickets from Tran Air Ltd., registered in Delhi, to travel from Delhi to Gujarat.

Location of supplier: Delhi

Place of supply: Gujarat

It is an interstate supply and the applicable tax is IGST.

Unregistered Person Place where the passenger boards on the transportation for a nonstop journey For passenger transportation service provided to unregistered persons, there can be 3 cases:

  1. Onward Journey

Aashish, an unregistered customer in West Bengal, purchases flight tickets from Tran Air Ltd, registered in West Bengal, to travel from West Bengal to Delhi.

Location of supplier: West Bengal

Place of supply: West Bengal.

It is an intrastate supply and the taxes applicable are CGST and SGST.

  1. Return Journey

Return journey will be treated as a separate journey, even if the tickets for onward and return journey are issued at the same time.

Aashish, in the above example, purchases flight tickets for the return journey from Delhi to West Bengal from Tran Air Ltd. The ticket is issued by Tran Air’s Delhi registration.

Location of supplier: Delhi

Place of supply: Delhi

It is an intrastate supply and the applicable taxes are CGST and SGST.

  1. When the point of embarkation is not known at the time of issue of ticket

In this case, place of supply will be the location of the supplier. Tran Air Ltd, registered in West Bengal, issues a pass for one-way anywhere travel in India to Aashish.

Location of supplier: West Bengal

Place of supply: West Bengal

It is an intrastate supply and the applicable taxes are CGST and SGST.

Services Supplied On Board for Conveyance Not Applicable Location of the first scheduled point of departure of the conveyance for the journey Tran Air Ltd, registered in Delhi, supplies food on board its flight from Delhi to Kerala via Mumbai.

For the catering service provided by Tran Air Ltd,

Location of supplier: Delhi

Place of supply: Delhi.

It is an intrastate supply and the applicable taxes are CGST and SGST.

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