Guidance on Determining Place of Supply for Goods Delivered to Unregistered Persons under GST - Clarified by CBIC

Key Points of the Clarification

1. Clause (ca) in Section 10(1) of the IGST Act:

   • "Clause (ca)": This clause, effective from October 1, 2023, addresses the place of supply for goods delivered to unregistered persons.
   • "Unregistered persons": Individuals or entities not registered under GST.
   • "Place of supply": Determined based on the delivery address recorded on the invoice.

2. Explanation to Clause (ca):

   • "Delivery address": The location where the goods are delivered is the key determinant for the place of supply.
   • "Recorded in the invoice": The address must be accurately noted on the invoice.
   • "Supplier's location": If no delivery address is recorded, the supplier's location is used as the place of supply.

Example Scenario

Scenario:

• An unregistered person (Mr. A) in State X orders a mobile phone from an e-commerce platform.
• Mr. A provides a billing address in State X and a delivery address in State Y.

Clarification:

• The place of supply will be the delivery address (State Y) recorded on the invoice.
• This ensures the GST applicable will be based on the delivery location (State Y).

Implementation Steps for Suppliers

1. Record Accurate Delivery Address:

   • Ensure the delivery address is accurately recorded on the invoice.
   • Verify that the billing address and delivery address are correctly entered to avoid any confusion.

2. Use Delivery Address for GST Calculation:

   • When the delivery address is different from the billing address, use the delivery address to determine the place of supply for GST purposes.
   • Example: If the billing address is in State X and the delivery address is in State Y, the place of supply will be State Y.

3. Invoice Format:

   • Update the invoice format to prominently display both the billing address and delivery address.
   • Clearly label these addresses to ensure they are not confused during processing.

4. E-commerce Platforms:

   • Ensure your system captures and reflects the correct delivery address on the invoice.
   • Inform your sellers and buyers about this provision to avoid any misunderstanding.

Trade Notices and Communication

1. Issue Trade Notices:

   • Tax officials should issue trade notices to inform businesses about this clarification.
   • Highlight the importance of recording the delivery address accurately on the invoice.

2. Ensure Uniformity:

   • The goal is to have consistent application of the law across all transactions involving unregistered persons.
   • Provide examples and scenarios in trade notices to illustrate the correct application of the rule.

3. Seek Assistance if Needed:

   • Encourage businesses to reach out to tax officials if they encounter difficulties in implementing these provisions.
   • Offer support and guidance to ensure smooth compliance.

Conclusion

The CBIC’s clarification ensures that for goods delivered to unregistered persons, the delivery address on the invoice determines the place of supply for GST purposes. By following these practical steps, suppliers and e-commerce platforms can ensure compliance with the updated provisions, promoting uniform application and reducing confusion.