Section 7(5) of IGST Act 2017 – General or Special provision ?


Section 7 of IGST Act 2017 determines nature of supply of goods or services or both in the course of inter-state trade or commerce.

Sub-section 5 of such section provides that following supplies shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

(a) Supply of goods or services or both when the supplier is located in India and the place of supply is outside India;

(b) Supply of goods or services or both to or by a Special Economic Zone developer or a Special Economic Zone unit; or

(c) Supply of goods or services or both in the taxable territory, not being an intra-State supply and not covered elsewhere in this section.

Some experts assume this sub-section as general provision to determine every transaction which is not an “Intra – State supply” to be treated as Inter-State Supply.

However some assumes this sub-section as specific provision to determine the nature of supply in respect of specific transactions only.

In this article, we will try to determine whether the provisions of this sub-section (5) are general or  applicable to specific transactions.


Clause (a) provides that when the supplier is located in India and the place of supply is outside India in respect of Supply of goods or services or both,  it shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

This clause applicable :-

  • when the supplier is located in India and
  • Place of supply is outside India.

e.g. A courier agency in India provides courier services to a person for delivery of goods from India to Australia. In this case, location of service provider is in India and place of supply as per section 12 of IGST Act is Australia. So the supply shall be treated as inter-state supply.

Hence, this clause is a specific clause where Location of supplier is in India and Place of supply of goods or services or both is outside India.


Clause (b) provides that Supply of goods or services or both to or by a Special Economic Zone developer or a Special Economic Zone unit shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce.

This clause covers only those supplies which are either supplied by or received by:-

  • SEZ developer or
  • SEZ unit

e.g. A SEZ unit in Haryana receives hotel/accommodation services from a supplier located in the state of Haryana. Nature of such supply shall be Inter-state supply even though both supplier and recipient are in same states.

Hence, this clause is also a specific clause.


Clause (c) provides that Supply of goods or services or both in the taxable territory, not being an intra-State supply and not covered elsewhere in this section.

This clause is applicable where all the following conditions satisfied:-

  • Supply of goods or services or both in the taxable territory,
  • Such supply is not covered under the definitions of intra-state supply,
  • Nature of such transaction is not covered under specific provisions from Section 7(1) to Section 7(5)(b) of IGST Act 2017.

It is pertinent to note here that this clause does not emphasise “PLACE OF SUPPLY”, but about only “supply of goods or services in taxable territory”.

Under GST laws, there is a huge difference between both sayings that:-

  • Supply of goods/services/both in taxable territory;
  • Place of supply of goods/services/both in taxable territory.

In most of cases for determination of nature of supply, Place of supply is a decisive factor. However, this clause provides a unique feature to decide nature of transaction. This clause is applicably only when supply is made in taxable territory.

Thus, in case supply is out of taxable territory, but the place of supply is in taxable territory, this clause is not applicable.

e.g. a person in Mumbai provided intermediary services to his client in Australia. As per section 13 of IGST Act, 2017, place of supply for this transaction is “Mumbai”. In this case, supply of service is out of India, but place of supply is in India. So, provisions of this clause are not applicable in this example.

Thus, this clause is also a specific provision with specific features and not a general one.

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