The place of supply under GST determines which government collects the tax and therefore whether you charge CGST plus SGST or IGST. If the location of the supplier and the place of supply are in the same state, the supply is intra-state and attracts CGST and SGST. If they are in different states, it is inter-state and attracts IGST. Get it wrong and your customer may lose input tax credit, while you must pay the correct tax again and claim a refund of the wrong one. The rules are in sections 10 to 13 of the IGST Act. This explainer turns them into practical decisions with examples.
Why place of supply matters
GST is a destination-based tax, so the tax should reach the state where goods or services are consumed. Place of supply is the legal tool that decides the destination. It affects:
- The tax type on the invoice: CGST and SGST, or IGST.
- The buyer's ability to claim credit. A buyer registered in Karnataka cannot use Tamil Nadu SGST charged by mistake.
- Reporting in GSTR-1, including state-wise reporting of B2C supplies.
- Refunds. Tax paid under the wrong head is refunded under section 77 of the CGST Act or section 19 of the IGST Act, without interest, only after the correct tax is paid.
For a refresher on the tax heads themselves, see CGST, SGST and IGST explained.
Place of supply of goods (section 10)
| Situation | Place of supply |
|---|---|
| Goods involve movement | Location where movement terminates for delivery to the recipient |
| Goods delivered to a third person on the instructions of the buyer (bill-to ship-to) | Principal place of business of the buyer who gave the instruction |
| No movement of goods | Location of the goods at the time of delivery |
| Goods assembled or installed at site | Place of installation or assembly |
| Goods supplied on board a vessel, aircraft, train or vehicle | Location where the goods are taken on board |
Example 1: simple movement
A Pune manufacturer ships goods worth ₹5,00,000 to a buyer's warehouse in Indore. Movement ends in Madhya Pradesh, so the supply is inter-state. At 18%, IGST is ₹90,000.
Example 2: bill-to ship-to
A buyer in Hyderabad (Telangana) orders goods worth ₹2,00,000 from a Mumbai supplier and asks that they be delivered directly to its customer in Mumbai. Under the bill-to ship-to rule, the place of supply for the Mumbai supplier's invoice is the buyer's principal place of business, Telangana. The supplier in Maharashtra charges IGST of ₹36,000 at 18%, even though the goods never leave Maharashtra. The Hyderabad buyer then invoices its Mumbai customer, and for that second transaction the place of supply is where the movement terminates, Maharashtra, so the Telangana buyer also charges IGST.
Example 3: installation at site
A Chennai firm supplies and installs a cold storage unit at a client's plant in Kochi. Place of supply is Kerala, the place of installation. The supply is inter-state and attracts IGST.
Place of supply of services (section 12): the general rule
When both supplier and recipient are in India:
- To a registered person: the location of the recipient.
- To an unregistered person: the address of the recipient on record, if available; otherwise the location of the supplier.
So a Gurugram consultancy billing a registered client in Jaipur charges IGST, while the same consultancy billing a walk-in individual with no address on record charges CGST and SGST of Haryana.
Services with special place of supply rules
Section 12 carves out many services where the general rule does not apply. The most common ones for SMBs are below.
| Service | Place of supply |
|---|---|
| Services related to immovable property, including hotel accommodation and architects' services for a building | Location of the property |
| Restaurant, catering, beauty, fitness, health services | Where the service is actually performed |
| Training and performance appraisal | Registered recipient: recipient's location. Unregistered: where performed |
| Admission to events, amusement parks | Where the event or park is located |
| Organising events | Registered recipient: recipient's location. Unregistered: where the event is held (if in India) |
| Transport of goods, including by courier | Registered recipient: recipient's location. Unregistered: where goods are handed over for transport |
| Passenger transport | Registered recipient: recipient's location. Unregistered: where the passenger embarks |
| Telecom and DTH | Rules based on installation address, billing address or recharge location |
| Banking and financial services | Location of the recipient on the supplier's records |
Example 4: hotel stay in another state
An employee of an Ahmedabad company stays in a Goa hotel for business. The tariff is ₹10,000 per night for 2 nights, that is ₹20,000. Place of supply is Goa, where the property is located, so the hotel charges Goa CGST and SGST. The Ahmedabad company cannot use Goa SGST against its Gujarat liability. Unless the company has a GST registration in Goa, this credit is effectively lost, and it is reported as ineligible ITC in Table 4D of GSTR-3B. Some groups register in states where they incur large hotel or event costs for this reason.
Example 5: training
A Kolkata training firm runs a programme in Bhubaneswar for a registered company based in Ranchi. Place of supply is Jharkhand, the registered recipient's location, so IGST applies. If the participants were unregistered individuals, place of supply would be Odisha, where the training was performed.
Cross-border supplies (section 13 and exports)
When either the supplier or the recipient is outside India, section 13 applies. The default rule is the location of the recipient, which is why most services to foreign clients qualify as exports. Exceptions include services on goods physically made available by the recipient, services tied to immovable property, and events, where the place of performance matters. Exports and supplies to SEZ are treated as inter-state and are zero-rated, so they are either exported under LUT without tax or with IGST paid and refunded. Our LUT guide explains the first route.
A five-question decision process
- Is it goods or services? Use section 10 for goods and section 12 for services within India.
- Is either party outside India? If yes, use the import/export rules instead.
- For goods, where does movement end, and is there a bill-to ship-to instruction?
- For services, is there a specific rule (property, events, transport, training)? If not, apply the general rule.
- Compare the place of supply with your registered location. Same state: CGST and SGST. Different state: IGST.
Common mistakes
- Using the billing address instead of the delivery location for goods.
- Charging CGST and SGST to a registered client in another state for services because the work was done locally.
- Ignoring bill-to ship-to and charging tax based on the consignee.
- Claiming hotel or event credit of another state in the home state.
- Not updating the state code when a customer moves or adds a branch.
Place of supply in mixed and tricky cases
Goods sold to a buyer who collects them
When a buyer from Andhra Pradesh sends its own truck to collect goods from a seller in Chennai, movement is arranged by the buyer, but the rule still looks at where the movement terminates for delivery. If the goods travel to Andhra Pradesh, the supply is inter-state and IGST applies. Keep the e-way bill and transport documents, because they prove where the goods went.
Online services to consumers
For services sold online to unregistered consumers within India, the address on record usually decides the place of supply. Capture the customer's state at checkout. Without it, the default falls back to the supplier's location, which may not reflect where the customer actually is.
Annual maintenance contracts across branches
A service provider in Bengaluru maintains equipment for a client that has a single GST registration in Mumbai but sites in several states. If the client is registered and the service is not tied to immovable property, the place of supply is the client's registered location, Maharashtra, and one IGST invoice works. If the client has separate registrations in each state, the invoice should be raised on the registration that receives the service so that credit stays in the right state.
Free samples and branch transfers
Stock transfers between your own registrations in different states are treated as supplies between distinct persons. The place of supply is where the goods move to, and IGST applies on the transfer value even though no sale to an outside party has happened. The receiving branch takes credit of that IGST.
Documents that support your place of supply
When an officer questions the place of supply, the answer lies in the paperwork. Keep these on file for every inter-state transaction:
- Purchase order or contract showing the buyer's registered location and instructions.
- Delivery address and e-way bill showing the destination.
- Proof of delivery or transporter receipt.
- For bill-to ship-to deals, the written instruction from the buyer to deliver to the third party.
- For services, the client's GSTIN and the location recorded in your customer master.
How Fininvo helps
Fininvo ERP applies tax based on buyer and seller location and supply type, so the invoice shows CGST and SGST or IGST as the place of supply requires, with the state shown on the document. Learn more on the invoicing and tax compliance pages or check pricing.
This is general information and not tax advice. Place of supply can be fact-specific; consult your CA for complex transactions.
Frequently Asked Questions
What happens if I charge IGST instead of CGST and SGST?
You must pay the correct CGST and SGST, then claim a refund of the IGST paid wrongly. No interest is payable on the correct tax if you follow the refund route, but the buyer's credit is disrupted until you issue a credit note and fresh invoice.
Is the place of supply the same as the delivery address?
Often, but not always. For bill-to ship-to transactions in goods, it is the buyer's principal place of business. For services, the location of a registered recipient usually decides it, not where the service was delivered.
Why can't I claim ITC on hotel bills from other states?
Because the hotel charges CGST and SGST of the state where it is located, and that SGST can only be used by a registration in the same state. It is credit you cannot use in your home state.
Are supplies to SEZ units intra-state?
No. Supplies to SEZ units and developers are treated as inter-state and zero-rated, even when the SEZ is in the same state as the supplier.
How do I show place of supply on the invoice?
Print the state name and state code. For inter-state supplies, this is a mandatory invoice field under rule 46, and it is also needed in GSTR-1.
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