The place of supply is the first switch a finance team sets when raising a GST invoice. Get it right and CGST + SGST or IGST flows correctly, the buyer claims ITC without dispute, and the state-level settlement happens silently in the background. Get it wrong and you face a demand for the correct tax, interest under Section 50 from the original invoice date, and a buyer who cannot claim ITC because GSTR TwoB carries a different state code.
This guide walks through the place of supply rules in Sections 10 to 14 of the IGST Act, the most common B2B and B2C scenarios, and the special cases that catch services businesses (online services, transportation, training, real estate).
Why Place of Supply Matters
Under GST, every supply is taxed once. The question is which state collects the tax.
- If the location of the supplier and the place of supply are in the same state or union territory, the supply is intrastate. CGST and SGST (or UTGST) are charged at half the rate each.
- If the two are in different states or union territories, the supply is interstate. IGST is charged at the full rate.
- Special economic zone (SEZ) supplies and exports are zero-rated. They are interstate by default and are billed under LUT bond or with IGST and refund.
The supplier's GSTIN is fixed (it has a state code as the first two digits). The variable is the place of supply.
Section 10: Place of Supply for Goods
Section 10 of the IGST Act covers goods. The most common situations:
The most common error is the bill-to / ship-to scenario, where the goods are physically delivered to one state but the buyer (the bill-to party) is located in another. Place of supply follows the bill-to party.
Worked Example
Acme Pvt Ltd (Karnataka, GSTIN 29...) sells a machine to Beta Pvt Ltd (Tamil Nadu, GSTIN 33...). Beta directs Acme to deliver the machine to Beta's contractor in Andhra Pradesh.
- Bill-to: Beta in Tamil Nadu.
- Ship-to: Andhra Pradesh.
- Place of supply: Tamil Nadu (Beta's principal place).
- Tax: IGST (Karnataka to Tamil Nadu, interstate).
If the invoice charged CGST + SGST instead of IGST (treating ship-to as place of supply), Beta would not be able to claim ITC and Acme would owe IGST plus interest.
Section 12: Place of Supply for Services (Domestic)
Section 12 applies when both supplier and recipient are in India. The general rules and the special cases:
Default Rule
- For B2B (recipient is a registered person), place of supply is the location of the recipient.
- For B2C (recipient is unregistered), place of supply is the location of the recipient if the address is on record, otherwise the location of the supplier.
Specific Rules That Override the Default
For most B2B service businesses (consulting, IT services, marketing, professional fees), the practical rule is straightforward: ask the buyer's GSTIN, look at the state code (first two digits), and match it against your own GSTIN's state.
Worked Example
Bright Consulting LLP (Karnataka, 29...) provides advisory services to Cygnus Pvt Ltd (Maharashtra, 27...).
- Both are registered.
- Default rule applies: place of supply = location of recipient = Maharashtra.
- Tax: IGST.
If Cygnus had a Karnataka registration too and asked Bright to bill the Karnataka GSTIN 29...), the place of supply would be Karnataka and the supply intrastate (CGST + SGST).
Section 13: Place of Supply for Cross-Border Services
Section 13 applies when either the supplier or the recipient is located outside India. The default rule and the exceptions:
- Default: Location of the recipient.
- If recipient location is not available: location of supplier.
The specific overrides include performance-based services (e.g., a service performed on goods physically present in India), services in relation to immovable property in India, admission to events in India, and certain online information services (OIDAR).
Online Information and Database Access or Retrieval (OIDAR)
OIDAR services (cloud, advertising on platforms, e-books, online music, etc.) supplied by a foreign provider to an Indian recipient are taxed in India. Place of supply is the location of the recipient.
- If the Indian recipient is registered, the recipient pays GST under reverse charge (see our RCM guide).
- If the Indian recipient is unregistered (B2C), the foreign provider must register in India under a simplified scheme (Form GST REG-10) and pay GST. This is why your Netflix or Spotify subscription has GST included; the foreign provider is registered.
Export of Services: When Is It Zero-Rated
A service is treated as export of service under Section 2 6) of the IGST Act and is zero-rated under Section 16 only if all five conditions are met:
- The supplier is in India.
- The recipient is outside India.
- The place of supply is outside India (per Section 13).
- Payment is received in convertible foreign exchange (or INR where allowed by RBI).
- The supplier and recipient are not merely establishments of the same legal entity.
If any condition fails, the supply is not export but a normal interstate supply, and IGST is charged.
The place of supply test is the most commonly missed condition. For example, a service in relation to immovable property in India provided to a foreign recipient has place of supply in India under Section 13, so the supply is taxable, not export.
For our coverage of export refund mechanics, see GST refund for exporters.
Common Place-of-Supply Errors
- Charging CGST + SGST when the buyer is in a different state. The buyer's GSTIN reveals the state. Always match the state code.
- Treating bill-to / ship-to as ship-to driven. Place of supply follows bill-to (the party that the invoice is in the name of).
- Ignoring multiple registrations. A buyer may have GSTINs in multiple states. The buyer should specify which GSTIN to bill. Once specified, that state is the place of supply.
- Treating an export of service as zero-rated when place of supply is in India. Real estate broking for an NRI buying a flat in Bengaluru is a service in relation to immovable property in India; place of supply is in India; the supply is taxable, not exported.
- Not registering for OIDAR when supplying B2C from abroad. Foreign providers serving Indian B2C customers must register and charge GST.
Reporting Place of Supply on Invoice and in Returns
- Tax invoice: Must mention the place of supply (state name and code) for interstate supplies. For intrastate, the state of supplier and place of supply will be the same.
- GSTR One: Place of supply is captured for every B2B invoice (state-wise) and for B2C inter-state supplies above Rs 2,50,000 (state-wise). Smaller B2C interstate supplies are reported in aggregate by state.
- E-invoicing: Mandatory for businesses above Rs 5 crore. The IRP (Invoice Registration Portal) handles the place of supply against the buyer's GSTIN state code automatically. See our e-invoicing mandate guide.
- E-way bill: For movement of goods, the place of supply drives the routing of the EWB and the validity period.
Action Plan to Tighten Place-of-Supply Discipline
- Build the GSTIN state code into your invoicing system so the tax head (CGST/SGST vs IGST) auto-selects.
- For services, train the sales team to ask the buyer for the correct GSTIN at quote stage, not invoice stage.
- For exports, run the five-condition test before classifying any service as zero-rated.
- Maintain a state-wise reconciliation of supplies during the year so the GSTR Nine annual summary reconciles state-wise.
- Audit bill-to / ship-to transactions monthly. Errors here are the most common.
Where Tax Garden Helps
Place of supply is the most state-revenue-sensitive part of GST and the area where Department audits scrutinise the most. Tax Garden's Compliance Standard plan sets up your invoice templates, handles GSTINs at invoice creation, classifies exports correctly, and reconciles state-wise totals before every GSTR One and GSTR Nine submission.
For related reading, see our reverse charge mechanism guide, GST refund for exporters, and e-invoicing mandate.
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Sources
This guide is verified against Sections 10, 11, 12, 13, 14 of the IGST Act 2017, Section 2 6) (definition of export of services), Section 16 (zero-rated supplies), and CBIC FAQs on place of supply. Confirmatory practitioner coverage from ClearTax, IndiaFilings, IRIS GST and TaxGuru articles was reviewed. Always cross-check the specific situation against the relevant section text and any applicable advance ruling on cbic.gov.in before finalising the tax head on an invoice.
