Place Of Supply Under GST In India

The concept of place of supply under GST is the backbone of India’s Goods and Services Tax framework. Since GST is a destination-based tax, revenue accrues to the state where goods or services are actually consumed, not where they originate. This makes determining the correct place of supply essential for identifying the nature of the transaction and the type of tax applicable.

In simple terms, the place of supply GST provisions decide whether a transaction is taxed as an inter-state or intra-state supply and whether CGST, SGST, or IGST will apply. Without correctly determining the place of supply in GST, businesses risk incorrect tax payments, compliance issues, and potential penalties.

This article explains the legal framework, practical implications, and key provisions under the IGST Act governing the GST place of supply rules, while summarizing important sections in a simplified manner.

Why Place Of Supply Matters

GST is structured as a dual tax system comprising Central GST (CGST), State GST (SGST), and Integrated GST (IGST). The determination of tax type depends on two critical factors:

• Location of supplier
• Place of supply

If both are in the same state, it is an intra-state supply GST transaction, attracting CGST and SGST.
If they are in different states, it qualifies as an interstate supply under GST, attracting IGST.

Exports, imports, and supplies to or from Special Economic Zones (SEZs) are also treated as inter-state supplies.

Place Of Supply Under GST For Goods

The provisions governing the place of supply under GST for goods are laid down under section 10 IGST Act (for domestic supplies).

Section 10 IGST ACT

Under Section 10 IGST Act, the place of supply of goods is determined as follows:

1. Movement of goods involved: If the supply involves movement (by supplier, recipient, or a third party), the place of supply is where the movement ends for delivery.
2. Bill-to-ship-to-model (third-party direction): If goods are delivered to one person on the direction of a third person, it is deemed that the third person has received the goods. The place of supply becomes the principal place of business of such third person.
3. No movement of goods: When there is no movement, the place of supply is the location of goods at the time of delivery.
4. Supply to unregistered persons (amendment effective 1 October 2023): If goods are supplied to an unregistered person, the place of supply is the address recorded on the invoice. If no address is recorded, the supplier’s location is considered the place of supply.
5. Goods assembled or installed at the site: The place of supply is where installation or assembly occurs.
6. Goods supplied on board a conveyance: The place of supply is where goods are taken on board (e.g., aircraft, train, vessel).

These provisions under the GST place of supply rules ensure clarity even in complex logistics arrangements.

How TMWala can help: Businesses dealing with multi-state sales, drop shipments, or installation contracts often struggle with determining the correct place of supply. TMWala assists in transaction structuring and GST compliance review to ensure accurate tax treatment.

Place Of Supply Under GST For Services

The place of supply under GST for services is more nuanced than goods because services are intangible and may not involve physical movement.

The rules differ depending on whether both supplier and recipient are in India or one is located outside India.

Section 12 of the IGST Act

When both supplier and recipient are located in India, section 12 of the IGST Act applies.

General Rule

• If services are supplied to a registered person, the place of supply is the location of such person.
• If supplied to an unregistered person:
  • If the address is available on record place of supply is the recipient’s location.
  • If not, the supplier’s location.

Special Cases Under Section 12

1. Immovable property services: Services directly related to immovable property (architects, construction, lodging, event venues) place of supply is where the property is located.
2. Restaurant, catering, grooming, fitness services: Place of supply is where services are actually performed.
3. Training and performance appraisal
   • For registered persons – recipient’s location
   • For unregistered persons, where performed
4. Admission to events: The place of supply is where the event is actually held.
5. Organisation of events
   • For registered persons – recipient’s location
   • For unregistered persons, where the event is held
6. Transportation of goods
   • Registered person – recipient’s location
   • Unregistered person – where goods are handed over
7. Passenger transport services
   • Registered person – recipient’s location
   • Unregistered person – place of embarkation
8. Telecommunication services: Determined based on billing address, installation site, or selling agent location, depending on service type.
9. Banking and financial services: Recipient’s location as per supplier’s records; if unavailable, supplier’s location.
10. Insurance services
    • Registered person – recipient’s location
    • Unregistered person – recipient’s address on record.

These summarized principles under section 12 of the IGST Act simplify complex service transactions and ensure GST reaches the state of consumption.

How TMWala can help: Service providers such as consultants, event managers, telecom operators, and financial intermediaries can rely on TMWala for GST advisory to determine correct tax applicability and avoid misclassification.

Section 13 of the IGST Act

When either the supplier or the recipient is located outside India, section 13 of IGST Act applies.

General Rule

The place of supply is the location of the recipient.

If the recipient location is not available, it defaults to the supplier’s location.

Important Exceptions

1. Services related to goods physically made available: Place of supply is where services are actually performed.
2. Services requiring physical presence of the recipient: Place of supply is where services are performed.
3. Immovable property services: Place of supply is where the property is located.
4. Event-related services: Place of supply is where the event is held.
5. Banking services to account holders: Place of supply is the supplier’s location.
6. Intermediary services: Place of supply is the supplier’s location.
7. Short-term hiring of transport (excluding aircraft and vessels): Supplier’s location.
8. Online information and database access services (OIDAR): Place of supply is the recipient’s location, subject to specific conditions.

The framework under section 13 of the IGST Act ensures proper taxation of international transactions while preventing double taxation or non-taxation.

Inter-State Supply Under GST vs Intra-State Supply GST

The classification between interstate supply under GST and intra-state supply under GST depends on the comparison between:

• Location of supplier
• Place of supply

If both are in the same state, CGST + SGST apply.

If in different states, IGST applies.

Correct classification ensures appropriate credit flow and compliance under GST returns.

Location of the Supplier In GST

Understanding the location of the supplier in GST is equally important.

Generally, it refers to:

• The principal place of business is mentioned in the GST registration.
• If the supply is made from a branch, that registered location is considered.
• If supply originates from multiple locations, the one most directly concerned with the supply is considered.
• If none apply, the usual place of residence is taken.

Incorrect identification may lead to wrong tax charging.

Location of the Recipient Of Services Under GST

The location of the recipient of services under GST determines whether CGST-SGST or IGST applies.

Typically:

• For registered persons (B2B), it is the registered place of business.
• If services are received at another establishment, that establishment may be considered.
• If multiple locations are involved, the most directly concerned location is used.
• If no formal place exists, the usual place of residence is considered.

This concept is critical when applying the general rule under the place of supply under GST for services.

Practical Challenges In Applying GST Place Of Supply Rules

While the legal provisions are structured, practical implementation can be complicated in cases such as:

• Multi-location service contracts
• E-commerce supplies
• Bill-to-ship-to transactions
• Cross-border digital services
• Event management across multiple states

Errors in determining the place of supply of GST can lead to:

• Wrong tax payment
• Denial of input tax credit
• Interest and penalties
• Litigation

How TMWala can help: TMWala offers GST advisory, transaction review, and compliance support to ensure businesses correctly apply GST place of supply rules, determine the right tax type, and maintain seamless compliance.

Conclusion

The concept of place of supply in GST is central to India’s GST system. Since GST is destination-based, tax revenue belongs to the state where goods or services are consumed. The statutory framework under section 10 IGST Act, section 12 of IGST Act, and section 13 of IGST Act provides structured guidance for goods, domestic services, and cross-border services, respectively.

Understanding the place of supply under GST for goods and the place of supply under GST for services, along with identifying the location of the supplier in GST and the location of the recipient of services under GST, ensures proper classification between interstate supply under GST and intra-state supply under GST.

For businesses operating across multiple states or dealing with complex service models, careful analysis and professional guidance are essential to avoid costly errors and ensure smooth GST compliance.

FAQs

1. What is the place of supply under GST?
   It is the state where goods or services are considered consumed for GST purposes.
2. Why is the place of supply GST important?
   It decides whether IGST or SGST will apply.
3. What is interstate supply under GST?
   When the supplier and place of supply are in different states, IGST applies.
4. What is intra-state supply GST?
   When the supplier and place of supply are in the same state, CGST and SGST apply.
5. Which section covers the place of supply under GST for goods?
   Section 10 IGST Act.
6. What is the rule when goods involve movement?
   The place of supply is where the movement ends for delivery.
7. Which section applies to domestic services?
   Section 12 of the IGST Act.
8. When does section 13 of the IGST Act apply?
   When the supplier or recipient is outside India.
9. What is the location of the supplier in GST?
   The registered place of business of the supplier.
10. What is the location of the recipient of services under GST?
    The registered place of business or usual residence of the recipient.