Place of Supply

What it means

Place of supply is the location the GST law treats as the destination of a sale. Comparing it with the supplier’s location decides whether the supply is intra-state (CGST plus SGST) or inter-state (IGST), and which state gets the tax. The rules are in sections 10 to 13 of the IGST Act.

How it works

• Goods with movement: where the movement ends, that is where the goods are delivered.

• Bill-to ship-to: if you deliver goods to a third person on the buyer’s instructions, the place of supply is the buyer’s principal place of business.

• Goods without movement, such as goods sold at the counter: where the goods are at the time of delivery.

• Services to a registered business (B2B): generally the recipient’s registered location.

• Services to unregistered customers (B2C): the customer’s address on record, otherwise the supplier’s location.

• Services linked to immovable property, such as hotel stays and construction: where the property is located.

• Restaurant, beauty, fitness and event admission services: where the service is actually performed.

Example

A chartered accountant firm in Mumbai bills ₹50,000 plus 18% GST.

1. Client is a company registered in Bengaluru. Place of supply: Karnataka. Supplier is in Maharashtra, so it is inter-state: IGST 18% of ₹50,000 = ₹9,000.

2. Client is a Pune company. Place of supply: Maharashtra, intra-state: CGST ₹4,500 plus SGST ₹4,500.

3. A Mumbai company books a Goa hotel for ₹50,000 for a team offsite. Place of supply: Goa, where the hotel is. The hotel charges Goa CGST plus SGST of ₹9,000, and the Mumbai company cannot claim this credit unless it is registered in Goa.

If the firm wrongly charged CGST and SGST of ₹9,000 to the Bengaluru client, it would have to pay IGST of ₹9,000 again and then claim a refund of the wrong tax.

Key points to remember

• Always capture the customer’s state and GSTIN on the invoice; the portal uses it to check the tax type.

• Exports and supplies to SEZ units are treated as inter-state supplies.

• Online services to foreign customers have special rules, so check before treating them as exports.

• Errors here also cost the buyer input tax credit, which can hurt client relationships.