Library / Goods and Services Tax: The Professional's Master Guide
12. Place of Supply: Domestic Transactions (IGST Sections 7, 8, 10 and 12)
GST is a destination-based tax: the State where goods or services are consumed should get the tax. Once the location of the supplier and the place of supply are known, the supply is either intra-State (CGST plus SGST, or CGST plus UTGST) or inter-State (IGST). The rate is the same either way; what changes is the Government that collects the tax and whether the recipient can use the credit.
This chapter covers supplies where both the supplier and the recipient are in India. Chapter 4 deals with cross-border services.
12.1 Inter-State and intra-State supplies (Sections 7 and 8)
Section 7 of the IGST Act lists inter-State supplies and section 8 lists intra-State supplies. For goods, a supply is inter-State where the location of the supplier and the place of supply are in two different States, two different Union territories, or a State and a Union territory (section 7(1)). For services, section 7(3) applies the same test. Section 8(1) and 8(2) make a supply intra-State where both are in the same State or Union territory.
The IGST Act deems certain supplies to be inter-State whatever the locations:
- Imports: goods imported into India are inter-State supplies until they cross the customs frontiers of India (section 7(2)); import of services is inter-State (section 7(4)).
- Exports and supplies with place of supply outside India: where the supplier is in India and the place of supply is outside India (section 7(5)(a)).
- SEZ: a supply to or by a Special Economic Zone developer or unit is always inter-State (section 7(5)(b)), even if the supplier sits next door in the same city.
- Residual: any supply in the taxable territory which is not intra-State and not covered elsewhere (section 7(5)(c)).
- Tourists: a supply of goods to a tourist leaving India is not intra-State (proviso to section 8(1)), so IGST is charged. Section 15 of the IGST Act provides for refund of that IGST to the tourist, but the refund scheme has not been put into operation; check the current position before advising a retailer.
The Explanation to section 8 treats establishments of the same person in different States as establishments of distinct persons. A company registered in Gujarat and Maharashtra is two taxable persons for GST, and goods sent from one to the other are inter-State supplies (Schedule I, para 2).
Key point A supply to an SEZ unit is inter-State even where the SEZ is in the supplier's own State. Charging CGST plus SGST to an SEZ unit is one of the commonest errors seen in audit. The same rule applies to hotel rooms, conferencing and banqueting supplied to an SEZ unit: CBIC Circular 48/22/2018-GST treats them as inter-State supplies, although section 12(3) would otherwise fix the place of supply at the hotel. |
12.2 Place of supply of goods (Section 10)
Section 10 applies where both parties are in India. Section 11 covers goods imported into or exported from India (place of supply is the location of the importer, and the location outside India, respectively). The rules in section 10(1) are:
Clause | Situation | Place of supply |
|---|---|---|
10(1)(a) | Supply involves movement of goods, by the supplier, the recipient or any other person | Location where movement terminates for delivery to the recipient |
10(1)(b) | Goods delivered to the recipient or any other person on the direction of a third person (bill-to-ship-to) | Principal place of business of the third person |
10(1)(c) | No movement of goods | Location of the goods at the time of delivery to the recipient |
10(1)(ca) | Supply to an unregistered person (from 1 October 2023) | Address of the recipient recorded in the invoice; location of the supplier if no address is recorded |
10(1)(d) | Goods assembled or installed at site | Place of installation or assembly |
10(1)(e) | Goods supplied on board a conveyance (vessel, aircraft, train, motor vehicle) | Location where the goods are taken on board |
Clause (ca) was inserted by the IGST (Amendment) Act, 2023 to protect consuming States on sales to individual buyers, including online sales. CBIC Circular 209/3/2024-GST dated 26 June 2024 clarified that where the billing address and the delivery address of an unregistered buyer differ, the delivery address recorded on the invoice is to be taken as the address of the recipient.
Bill-to-ship-to transactions (Section 10(1)(b))
In a bill-to-ship-to deal, there are two sales but only one physical movement. The first seller delivers directly to the ultimate buyer on the instructions of the middle party. Section 10(1)(b) deems the middle party to have received the goods, so the first sale takes its place of supply from the middle party's principal place of business, wherever the goods actually go. The second sale follows the normal rule in section 10(1)(a). One e-way bill with the bill-to and ship-to details is enough for the single movement.
Illustration 67: Three-party bill-to-ship-to sale Kalyan Steel Pvt. Ltd., Mumbai (Maharashtra), sells steel coils to Bharat Traders, Ahmedabad (Gujarat), for Rs. 10,00,000. Bharat has resold the coils to Pune Fabricators, Pune (Maharashtra), for Rs. 11,50,000 and asks Kalyan to deliver them from Mumbai straight to Pune. GST is 18%. Step 1 (Kalyan to Bharat): section 10(1)(b) applies. Place of supply is Gujarat, Bharat's principal place of business. Kalyan is in Maharashtra, so the supply is inter-State. IGST = 18% of Rs. 10,00,000 = Rs. 1,80,000, even though the goods never leave Maharashtra. Step 2 (Bharat to Pune Fabricators): movement ends at Pune, so place of supply is Maharashtra (section 10(1)(a)). Bharat is in Gujarat, so IGST = 18% of Rs. 11,50,000 = Rs. 2,07,000. Step 3: Bharat takes credit of Rs. 1,80,000 and pays Rs. 27,000 net. Bharat does not need registration in Maharashtra, and Pune Fabricators takes IGST credit of Rs. 2,07,000. |
Illustration 68: Machine installed at site Coimbatore Machine Tools, registered in Tamil Nadu, supplies and installs a CNC machine at a factory in Bengaluru for Rs. 25,00,000 plus 18% GST. The machine is bolted to the floor but can be removed and sold, so it remains goods. Place of supply is Karnataka, where the machine is installed (section 10(1)(d)). The supplier is in Tamil Nadu. IGST = Rs. 4,50,000. |
Illustration 69: Goods sold on board a train Annapurna Caterers, registered in Gujarat, loads packaged namkeen at Ahmedabad on an Ahmedabad to Mumbai train and sells packets worth Rs. 50,000 during the journey, mostly after the train enters Maharashtra. Namkeen is at 5%. Place of supply is Gujarat, where the goods were taken on board (section 10(1)(e)). The supply is intra-State: CGST Rs. 1,250 + SGST Rs. 1,250 = Rs. 2,500. |
12.3 Place of supply of services (Section 12)
Section 12 applies where both the supplier and the recipient are in India. It has a general rule in section 12(2) and twelve specific rules in section 12(3) to (14). A specific rule always overrides the general rule. Where a service is tied to a place (a building, a restaurant, an event), tax goes to that place; where it is tied to a person, it goes to where that person is.
Under the general rule, a supply to a registered person has its place of supply at the location of that person. For an unregistered recipient, place of supply is the location of the recipient where the address is on record, and the location of the supplier in other cases. "Address on record" means an address obtained in the normal course of business (for example, from the customer's KYC or the contract), not one written in to change the tax.
Sub-section | Service | Place of supply |
|---|---|---|
12(2) | General rule | Registered recipient: its location. Unregistered: address on record, else location of supplier |
12(3) | Immovable property (architects, surveyors, estate agents, construction, renting); hotel and guest house accommodation; accommodation for functions and banquets | Location of the immovable property, boat or vessel; if outside India, location of the recipient |
12(4) | Restaurant and catering, personal grooming, fitness, beauty treatment, health services including cosmetic surgery | Location where services are actually performed |
12(5) | Training and performance appraisal | Registered: location of recipient. Unregistered: where performed |
12(6) | Admission to cultural, sporting, educational, entertainment events or amusement parks | Place where the event is held or the park is located |
12(7) | Organising an event, including sponsorship and ancillary services | Registered: location of recipient. Unregistered: where event held (outside India: location of recipient) |
12(8) | Transport of goods, including mail and courier | Registered: location of recipient. Unregistered: where goods are handed over for transport |
12(9) | Passenger transport | Registered: location of recipient. Unregistered: where the passenger embarks for a continuous journey |
12(10) | Services on board a conveyance | First scheduled point of departure |
12(11) | Telecom, including DTH and internet | Fixed line and leased circuit: place of installation. Postpaid: billing address. Prepaid: where the voucher is sold or recharge made. Others: address on record |
12(12) | Banking and financial services, including stock broking | Location of recipient on the supplier's records; else location of supplier |
12(13) | Insurance | Registered: location of recipient. Unregistered: location of recipient on the insurer's records |
12(14) | Advertising to the Central or a State Government, a statutory body or local authority, meant for identifiable States | Each State where the advertisement is broadcast or published, in proportion to value |
Where immovable property, an event or a leased circuit falls in more than one State, the value is split between the States in proportion to the contract, or on a reasonable basis where the contract is silent (Explanations to section 12(3), 12(7) and 12(11)). The proviso to section 12(8), which fixed the destination of goods as the place of supply for transport of goods to a place outside India, was omitted from 1 October 2023; the general rule for transport of goods now applies to such transport as well.
Illustration 70: General rule for a professional firm Desai and Co., Chartered Accountants, Ahmedabad (Gujarat), raises three bills at 18%: Bill 1: Rs. 2,00,000 to a company registered in Delhi. Place of supply is Delhi (location of registered recipient). IGST = Rs. 36,000. Bill 2: Rs. 50,000 to an unregistered individual in Jaipur whose address is on record. Place of supply is Rajasthan. IGST = Rs. 9,000. Bill 3: Rs. 10,000 to a walk-in client for a one-time certificate, with no address on record. Place of supply is Gujarat (location of supplier). CGST Rs. 900 + SGST Rs. 900. |
Illustration 71: Hotel stay and banquet for a sales conference Sunrise Pharma Ltd., registered only in Gujarat, books 10 room-nights at a hotel in Goa at Rs. 9,000 per night for its sales team. As the tariff is above Rs. 7,500, the rate is 18%. Step 1: Value = 10 x Rs. 9,000 = Rs. 90,000. Place of supply is Goa, where the hotel is (section 12(3)). Step 2: The hotel charges CGST Rs. 8,100 + SGST (Goa) Rs. 8,100 = Rs. 16,200. Step 3: Sunrise cannot use this credit against its Gujarat liability. GSTR-2B will show it as ineligible because the supplier and place of supply are in Goa while Sunrise is registered in Gujarat. The banquet hall for the conference follows the same rule. The tax is a cost unless Sunrise has a Goa registration. |
Illustration 72: Organising a dealer conference Utsav Events, Mumbai (Maharashtra), organises a dealer conference at Udaipur (Rajasthan) for a fee of Rs. 8,00,000 plus 18% GST. Case A: the client is a company registered in Telangana. Place of supply is Telangana (section 12(7)(a)). IGST = Rs. 1,44,000; the client takes full credit. Case B: the client is an unregistered trust in Mumbai. Place of supply is Rajasthan, where the event is held (section 12(7)(b)). IGST = Rs. 1,44,000, and the tax goes to Rajasthan. |
Illustration 73: Transport of goods and of passengers Goods: Speedway Roadlines, a GTA in Delhi that has not opted to pay tax itself, carries goods from Delhi to Jaipur for Haryana Auto Parts Pvt. Ltd., registered in Haryana. Freight is Rs. 40,000. The recipient is registered, so place of supply is Haryana (section 12(8)). Under reverse charge at 5%, Haryana Auto Parts pays IGST of Rs. 2,000. Passengers: Kumar buys a Mumbai to Delhi economy ticket for Rs. 6,000 without giving a GSTIN. Place of supply is Maharashtra, where he embarks (section 12(9)). GST at 5% = Rs. 300 (CGST Rs. 150 + SGST Rs. 150). If he books the same ticket with his Karnataka employer's GSTIN, place of supply is Karnataka and the airline charges IGST of Rs. 300. |
12.4 Tax paid under the wrong head (Section 77 of the CGST Act and Section 19 of the IGST Act)
If a supply is treated as intra-State but is really inter-State, the supplier has paid CGST and SGST where IGST was due. The law does not allow the wrong tax to be adjusted against the right one. The supplier must pay the correct tax and claim a refund of the tax wrongly paid. The four provisions are:
Tax paid | Tax actually due | Relief |
|---|---|---|
CGST + SGST | IGST | Refund of CGST and SGST (section 77(1) of the CGST Act); no interest on the IGST paid late (section 19(2) of the IGST Act) |
IGST | CGST + SGST | Refund of IGST (section 19(1) of the IGST Act); no interest on the CGST and SGST paid late (section 77(2) of the CGST Act) |
Rule 89(1A) of the CGST Rules, inserted in September 2021, requires the refund claim within two years from the date of payment of the correct tax. CBIC Circular 162/18/2021-GST clarified that the relief applies whether the supplier finds the mistake himself or an officer points it out, and that the refund does not depend on the supply being "held" inter-State by an order. The claim is filed in RFD-01.
Illustration 74: CGST and SGST charged in place of IGST Nirmal Chemicals, Vadodara (Gujarat), supplied goods worth Rs. 10,00,000 (18%) in July 2025 to a buyer registered in Maharashtra, with delivery at Nashik. Because the order came through the buyer's Vadodara purchase office, Nirmal charged CGST Rs. 90,000 + SGST Rs. 90,000. The buyer's GSTR-2B showed the credit as unavailable. Step 1: Nirmal amends the invoice in GSTR-1 to show Maharashtra as place of supply and pays IGST of Rs. 1,80,000. No interest is payable on this IGST (section 19(2) of the IGST Act). Step 2: Nirmal files RFD-01 for the refund of CGST and SGST of Rs. 1,80,000 within two years from the date the IGST was paid. Step 3: The buyer takes IGST credit of Rs. 1,80,000 on the amended invoice. Nirmal's Rs. 1,80,000 stays blocked until the refund arrives. |
Practice note Build place of supply checks into the billing system: the ship-to State for goods, the GSTIN State of a registered recipient for most services, and fixed overrides for hotel, event, SEZ and bill-to-ship-to cases. Errors caught before GSTR-3B is filed cost nothing to fix; caught later, they lock up cash for months. |
12.5 Place of supply in invoices and returns
Rule 46 of the CGST Rules requires every tax invoice for an inter-State supply to show the place of supply with the name of the State, and the delivery address where it differs from the place of supply. In GSTR-1, place of supply is reported invoice-wise for B2B supplies and for inter-State B2C invoices above Rs. 1,00,000, and State-wise for other B2C supplies.
Table 3.2 of GSTR-3B reports inter-State supplies made to unregistered persons, composition taxpayers and UIN holders, State by State. Table 3.2 is auto-populated from GSTR-1, GSTR-1A and IFF. After a plan to lock it from April 2025 was deferred, GSTN made these values non-editable from the November 2025 tax period; corrections must now be made through GSTR-1A before filing GSTR-3B, or in the next GSTR-1. Scrutiny notices now compare Table 3.2 with the State-wise B2C figures in GSTR-1, so the two must agree.
Chapter summary • Place of supply, read with the location of the supplier, decides whether IGST or CGST plus SGST is payable; rate is not affected but the collecting Government and the recipient's credit are. • Imports, exports, supplies to or by SEZ developers and units, and supplies to tourists are inter-State by law. • Goods: where movement ends; bill-to-ship-to follows the third person's principal place of business; no movement, installation and on-board supplies have their own rules; supplies to unregistered persons follow the address in the invoice. • Services between Indian parties: location of registered recipient under the general rule, with specific rules for immovable property, restaurants, training, events, transport, telecom, banking, insurance and Government advertising. • Hotel, banquet and construction services in another State carry that State's CGST and SGST, which the recipient cannot use unless registered there. • Tax paid under the wrong head is not adjusted: pay the correct tax without interest and claim a refund within two years (section 77 of the CGST Act, section 19 of the IGST Act, rule 89(1A)). • Invoices must show place of supply; GSTR-1 and Table 3.2 of GSTR-3B carry it to the settlement between Governments. |
© Vipin Nair. This guide is for reading online only. Copying, downloading, printing and redistribution are not permitted. For study and general reference; not legal, tax or investment advice.