EXAMPLE

X in Gujarat has awarded a contract to Y in Karnataka for supply of Plant and machinery and their installation. Y in turn placed order on Z in Mumbai for supply of plant and machinery to X. Z supplies plant and machinery directly to X in Gujarat and issued invoice to Y in Karnataka. The plant and machinery is finally installed by Y as per the requirement and raises the bill on X including the value of plant and machinery. Determine as to how the transaction would be taxed under GST.

ANSWER

According to section 10(b) of IGST Act, where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.

 

Thus, the supplier of goods i.e. Z is located in Mumbai and place of supply according to above provision will be Karnataka. 

 

In second transaction, further supply of goods and their installation invoice would be raised by Y to X and tax of integrated tax would be chraged on value of plant and machinery including installation charges.