GST Update on Provisions Of Section 10(1)(b) & Online Utility Of GSTR-1

The place of supply has been a matter of dispute since the IGST Act, 2017 has come into force. The section 10(1)(b) of IGST Act reads as follows:-

"(b) 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;"
The analysis of above provision makes it clear that the place of supply in case of agents shall be the location of agent even in cases where the goods are directly delivered by the supplier to the buyer on direction of the agent. The highlighted portion of above section brings out the fact that in such a case, it shall be deemed that the third person (agent) has received the goods. Accordingly, the place of supply in case agent is involved will be the agent's place.
The online utility of GSTR-1 has the provision that once we fill in the detail of Place of supply, the Supply type (i.e. intra state or inter-state) is auto populated in it. In case the place of supply is filled in as a state other than state of supplier, the supply type is auto populated as "inter-state" in that form.
Thus, in case where supplier and buyer are in the same state and agent is located in any other state, the place of supply for supplier will be deemed as premise of agent as per interpretation laid down in the section 10(1)(b) above [that it will be deemed that the agent has received the goods even if the delivery is directly made to the buyer in the same state]. This can be understood with the help of following example:-
Suppose,
• Supplier is located in Rajasthan.
• Agent is located in Gujarat.
• Buyer is located in Rajasthan.
In above case, even if the goods are directly delivered by the supplier (in Rajasthan) to the buyer (in Rajasthan); according to interpretation laid down in the section 10(1)(b), it shall be deemed that the agent (in Gujarat) has received the goods. This analogy is also reflected in the online utility of GSTR-1 as available on the website of GST.
Therefore, in the given example, the supplier shall have to raise the bill in the name of agent and thereby IGST will be charged as the supply will be inter-state in this case. Further, the agent shall avail the ITC of IGST so charged and he shall further raise the invoice in the name of buyer. Again, IGST shall be charged by him on the invoice raised in the name of buyer. This also means that in every case, the invoice has to be raised by the agent and this intention is reflected by the fact that an agent is required to obtain mandatory registration under section 24 of CGST Act, 2017.
However, the above treatment will make the compliance under GST easy and there will be smooth flow of ITC. But, at the same time , it will create problem in income tax as the books of agent will be showing huge turnover while his actual receipts (i.e. commission) will be on much lower side.

You can visit us at www.capradeepjain.com

and also at our facebook page at https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/

Comments

GST Update on Provisions Of Section 10(1)(b) & Online Utility Of GSTR-1

Post a Comment

Query