What Is the Place of Supply Under GST?
Under the Goods and Services Tax (GST) law, the place of supply is the location that determines the tax treatment of a transaction. Understanding it is important for every business because it helps decide whether a transaction is:
- Intra-State supply – generally subject to CGST + SGST/UTGST (when supplier & place of supply are in the same state)
- Inter-State supply – generally subject to IGST (when supplier & place of supply are in different states)
For example, if a business in Maharashtra sells goods to a customer in Maharashtra, it may be an intra-State supply. If the goods are supplied from Maharashtra to a customer in Karnataka, it may be an inter-State supply.
Why Is Place of Supply Important?
Getting the place of supply wrong can result in charging the wrong type of GST, requiring you to pay the correct tax and claim a refund for the wrong one, creating major compliance and cash flow issues. The place of supply determines:
- Which GST (CGST+SGST or IGST) should be charged
- Whether the transaction is intra-State or inter-State
- Which State gets the tax revenue (since GST is a destination-based consumption tax)
- How GST invoices should be prepared
- Whether a transaction qualifies as an export or import
Statutory Rules for Place of Supply of Goods
The GST rules for determining the place of supply of goods are structured around specific commercial scenarios under Section 10 of the IGST Act:
1 Goods Supplied Involving Movement of Goods
This is the most common business situation. Where the supply involves movement of goods—whether carried out by the supplier, the recipient, or any other person—the place of supply is the location where the movement of goods terminates for delivery to the recipient.
Practical Example
ABC Ltd. is located in Maharashtra and sells machinery to XYZ Ltd. in Gujarat. The machinery is transported from Maharashtra to Gujarat and the movement ends at the customer's factory in Gujarat for delivery.
- Supplier Location: Maharashtra
- Place of Supply: Gujarat
- Nature of Supply: Inter-State (IGST charged)
2 Bill-to and Ship-to Transactions
This model is highly common in supply chains. It involves three parties: the original supplier, the buyer who places the order, and the final customer who receives the goods. When the supplier delivers goods to a recipient on the direction of a third person, the third person is deemed to have received the goods. The place of supply is the principal place of business of that third person.
Practical Example
A is a supplier in Maharashtra. B is a buyer in Uttar Pradesh. B purchases goods from A but instructs A to send the goods directly to C in Karnataka.
- Supply from A to B: Place of supply is Uttar Pradesh (B's principal place of business).
- This billing style ensures tax is routed through the intermediate buyer's location.
3 Supply of Goods Involving No Movement of Goods
Sometimes goods are sold but there is no physical movement of the goods by either the supplier or the recipient. In such cases, the place of supply is the location of the goods at the time of delivery to the recipient.
Practical Example
A company in Delhi owns a machine that is already installed in a factory in Rajasthan. The company sells that machine to the factory owner in Rajasthan without moving it.
- Place of Supply: Rajasthan (location of the goods at the time of delivery).
- Note: Businesses should not assume that the seller's registered office automatically determines the place of supply.
4 Supply of Goods Requiring Installation or Assembly
Where goods are assembled or installed at a site (like industrial machinery, lifts, power systems), the place of supply is the place where the goods are assembled or installed.
Practical Example
A machinery manufacturer in Maharashtra sells a large industrial machine to a customer, and the manufacturer installs the machine at the customer's factory in Tamil Nadu.
- Place of Supply: Tamil Nadu (the site of installation/assembly).
- The location of the supplier alone does not decide the place of supply in such cases.
5 Goods Supplied on Board a Conveyance
Special rules apply when goods are supplied on board a conveyance such as an aircraft, vessel, train, or motor vehicle. The place of supply is the location where the goods are taken on board the conveyance.
Practical Example
A supplier loads food items and beverages onto an aircraft at Mumbai airport for sale or consumption on board a flight to Delhi.
- Place of Supply: Mumbai (where the goods were taken on board).
6 Supply of Goods to an Unregistered Person (B2C)
This is an important provision for businesses dealing with direct B2C transactions. The place of supply is:
- The location corresponding to the address of the unregistered person recorded in the invoice.
- The location of the supplier if the recipient's address is not recorded in the invoice (recording the name of the State of the unregistered person in the invoice is treated as recording the address).
Practical Examples
Example 1 (Address Recorded): An unregistered customer purchases a phone. The supplier records the customer's address in Maharashtra on the invoice. Place of supply = Maharashtra.
Example 2 (Address Not Recorded): An unregistered customer buys items in a store and no address is recorded. Place of supply = Location of the Supplier.
What If Billing Address and Delivery Address Are Different?
This situation is extremely common in online shopping, e-commerce, gifts, or deliveries to family members or different corporate offices.
Example: Mr. A is an unregistered customer. His billing address is in Maharashtra, but he orders a laptop online and asks the seller to deliver it to his home in Goa. If the delivery address is recorded on the invoice as the address of the recipient, the place of supply is determined based on the delivery address recorded on the invoice, i.e., Goa.
Place of Supply of Imported and Exported Goods
Section 11 of the IGST Act deals specifically with goods that cross national boundaries, applying two main rules:
1. Goods Imported into India
For goods imported into India, the place of supply is the location of the importer.
Example: A company in Maharashtra imports machinery from Germany. Importer location is Maharashtra, so Place of Supply = Maharashtra.
2. Goods Exported from India
For goods exported from India, the place of supply is the location outside India.
Example: A manufacturer in Gujarat exports goods to a customer in Dubai. Place of Supply = Outside India (qualifies as a zero-rated supply subject to procedures).
Conclusion
The Place of Supply under GST is a key concept that helps determine the correct GST treatment of a transaction. While the rules for goods are often easier to understand, services can involve several special provisions.
Businesses should always check the nature of the supply, location of the supplier, location of the recipient and applicable place-of-supply rule before issuing a GST invoice.
Correctly determining the place of supply helps businesses charge the right GST, maintain accurate records and reduce the risk of GST compliance issues.
Get Your Place of Supply Determinations Correct
Incorrectly identifying the place of supply can lead to unnecessary tax disputes, penalties, and blocked working capital. Consult our GST professionals to audit your billing setup.
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Disclaimer:
The information provided in this document is for general awareness on the Place of Supply under GST. Tax provisions are subject to statutory amendments. Readers are advised to consult a qualified Chartered Accountant before executing tax claims.