Place of Supply Rules Under GST: Goods, Services, Exports & Common Errors (2026)

Place of Supply Rules Under GST: Goods, Services, Exports & Common Errors (2026)

Almost every GST error that leads to a departmental notice traces back to one root cause: the wrong tax was charged on the invoice — IGST instead of CGST+SGST, or vice versa. Behind nearly all of these mistakes sits a single, deceptively simple question that businesses get wrong more often than expected: what is the "place of supply" of this transaction?

This guide explains what place of supply means, the distinct rules that apply to goods versus services, why this single determination decides whether you charge IGST or CGST+SGST, how exports and imports are treated, and the recurring errors that trip up even experienced accounting teams.

What Is "Place of Supply" and Why It Matters

GST is a destination-based consumption tax, meaning the tax revenue is meant to accrue to the state where the goods or services are actually consumed, not necessarily where the supplier is located. To operationalise this principle, GST law defines a specific set of rules — the "place of supply" provisions — that determine, for every transaction, which state (or country) is deemed to be the place where the supply is consumed.

The place of supply, compared against the supplier's location, determines the nature of the tax charged:

• If the supplier's location and the place of supply are in the same state (or union territory), the transaction is treated as an intra-state supply, and CGST + SGST (or CGST + UTGST) is charged.
• If the supplier's location and the place of supply are in different states, the transaction is treated as an inter-state supply, and IGST is charged instead.

This determination is not optional or a matter of convenience — charging the wrong type of tax (say, CGST+SGST when IGST was actually due) is treated as an error under GST law, and simply correcting the invoice does not automatically fix the underlying compliance and refund complications that follow.

Place of Supply for Goods

For goods, the place of supply rules are generally more straightforward than for services, since physical movement of goods provides a clear reference point.

1. Supply involving movement of goods:

The place of supply is generally the location where the movement of goods terminates for delivery to the recipient — in other words, the destination where the goods are ultimately delivered, not necessarily where the invoice is billed or where the order was placed.

2. Supply not involving movement of goods (e.g., goods delivered from a fixed location without transport, such as an over-the-counter sale):

The place of supply is generally the location of the goods at the time of delivery to the recipient.

3. Goods assembled or installed at site:

Where goods are assembled or installed at a site (like machinery installed at a factory), the place of supply is generally the location of that installation or assembly site.

4. Goods supplied on board a conveyance (train, vessel, aircraft, or motor vehicle):

The place of supply is generally the location where the goods are taken on board the conveyance.

5. "Bill-to-ship-to" transactions:

A common and frequently misunderstood scenario — where goods are billed to one party (say, a company's head office) but physically shipped to a different party or location (say, a branch or a third party) on that company's instruction. In such cases, the place of supply rules provide a specific mechanism treating the transaction as two deemed supplies: one between the supplier and the billing party, and another between the billing party and the actual recipient — each leg determined by its own place of supply, based on the location of the party who instructed the shipment versus the third party's location.

Place of Supply for Services

Services are inherently harder to pin down geographically than goods, since there's no physical movement to anchor the determination. GST law therefore uses a layered approach, generally distinguishing between B2B (registered recipient) and B2C (unregistered recipient) transactions, along with several specific categories that override the general rule.

General rule:

• Where the recipient is registered, the place of supply is generally the location of the recipient.
• Where the recipient is unregistered, the place of supply is generally the location of the recipient if their address is on record; otherwise, it defaults to the location of the supplier.

Specific/override categories (these take precedence over the general rule for the relevant service type):

• Services directly related to immovable property (architects, interior decorators, real estate agents, construction-related services, and similar) — place of supply is generally the location of the immovable property.
• Restaurant, catering, personal grooming, fitness, and similar services performed in person — place of supply is generally the location where the service is actually performed.
• Admission to an event (cultural, artistic, sporting, educational, entertainment) — place of supply is generally the location where the event is held.
• Transportation of goods, including by mail or courier — place of supply generally follows the recipient's location if registered, or the location where goods are handed over for transportation if the recipient is unregistered.
• Passenger transportation services — place of supply is generally the location of the recipient if registered, or the point of embarkation for an unregistered recipient.
• Telecommunication, banking, and financial services — these carry their own specific rules, often linked to the location of the recipient's address on record with the service provider, or the location from which the service is availed.
• Insurance services — generally the location of the recipient if registered, or the address on record if unregistered.

Because so many common freelance and consulting services (design, IT, marketing, management consulting) fall under the general rule rather than a specific override, the place of supply for most B2B consulting work is simply the client's registered location — which is exactly why billing an out-of-state client almost always triggers IGST rather than CGST+SGST.

Why This Single Determination Decides CGST/SGST vs IGST

It's worth restating this clearly because it is the single most consequential outcome of the entire place-of-supply framework: the comparison between the supplier's location and the place of supply — not the billing address, not the currency, not where the contract was signed — is what decides the tax type.

• Same state → CGST + SGST. Both components go to the same government pair (Centre and the specific state), and the recipient in that state can claim credit accordingly.
• Different states → IGST. A single integrated tax is charged, which the recipient (if registered) can claim as ITC regardless of which state they are in, with the inter-state settlement of revenue between states and the Centre happening administratively behind the scenes.

Getting this wrong has real consequences: if a supplier incorrectly charges CGST+SGST on what should have been an inter-state (IGST) transaction, the recipient generally cannot validly claim that CGST+SGST as ITC against their own inter-state liability, and the supplier typically has to correct the invoice, refund/adjust the wrongly charged tax, and pay the correct IGST — a process that can take considerable time and create cash-flow friction on both sides.

Exports and Imports: Place of Supply Treatment

Export of goods and services are treated as inter-state supplies and are further classified as zero-rated supplies under GST — meaning no GST is ultimately meant to be borne on export transactions, achieved either through a Letter of Undertaking (no IGST charged upfront) or by paying IGST and subsequently claiming a refund.

• For export of goods, the place of supply is generally treated as being outside India, aligning with the destination-based principle — actual determination follows specific export-related provisions rather than the domestic goods rules.
• For export of services, the transaction qualifies as an export only if specific conditions are met (supplier in India, recipient outside India, place of supply outside India, payment received in convertible foreign exchange or permitted equivalent, and the parties not being merely establishments of a single distinct person). Where these conditions are met, the place of supply is effectively treated as outside India, and the transaction qualifies for zero-rating.

Import of goods is treated as an inter-state supply, with IGST charged at the point of customs clearance, alongside applicable customs duties — this IGST is generally available as ITC to a registered importer, subject to the usual conditions.

Import of services is generally taxed on a reverse charge basis, where the Indian recipient (rather than the foreign supplier) is liable to pay GST directly to the government, and can typically claim ITC on that self-paid tax subject to the usual eligibility conditions — this is a frequently overlooked liability for Indian companies paying overseas vendors for software subscriptions, consulting, or digital services.

Common Errors in Applying Place of Supply Rules

• Using the billing address instead of the delivery/recipient location to determine place of supply for goods, especially in bill-to-ship-to scenarios where the two diverge.
• Charging CGST+SGST by default for a client simply because the supplier is used to billing local customers, without checking the client's actual registered location for a B2B service.
• Missing the override categories for services — for example, treating an interior design project's place of supply as the designer's own location instead of the immovable property's location.
• Failing to self-assess reverse charge IGST on imported services, such as overseas SaaS subscriptions, cloud hosting, or consulting fees paid to foreign vendors.
• Assuming exports are automatically tax-free without meeting all conditions, particularly the requirement to receive payment in convertible foreign exchange and to have a valid LUT (or to pay IGST and claim a refund) in place.
• Incorrect treatment of bill-to-ship-to transactions, especially where the billing party, shipping party, and actual recipient are in three different states, requiring careful two-leg analysis.
• Not updating place of supply logic in accounting/ERP systems after a client relocates or a new branch is added, leading to systemic misclassification across many invoices before the error is caught.
• Treating online/digital service sales to individual consumers uniformly, without checking whether specific rules for that category of service (where they exist) override the general recipient-location rule.

Given how mechanically these rules interact with invoicing systems, most businesses benefit from periodically auditing a sample of invoices against the underlying place-of-supply logic, rather than assuming the accounting software has been configured correctly once and left unchecked.

Frequently Asked Questions

How is place of supply different from the location of the supplier?

The location of the supplier is simply where the seller/service provider is registered or operates from. Place of supply is a separate, rules-based determination of where the recipient is deemed to consume the goods or service — comparing the two is what decides whether CGST+SGST or IGST applies.

What is the place of supply for goods sold and delivered within the same city?

Generally, the location where the movement of goods terminates for delivery to the recipient — if that delivery point is in the same state as the supplier, it is an intra-state supply attracting CGST+SGST.

Does the place of supply change if payment is received from a different state than the delivery address?

No. Place of supply for goods is generally tied to the delivery/movement termination point (or the recipient's location for many services), not the state from which payment happens to be remitted.

What place of supply rule applies to a freelancer providing services to a company in another state?

For most B2B consulting and professional services without a specific override, the place of supply follows the general rule — the location of the registered recipient. If the client is in a different state from the freelancer, this results in an inter-state supply and IGST.

How is place of supply determined for services related to a building or property?

Services directly related to immovable property — such as architecture, interior design, or construction — follow a specific rule where the place of supply is the location of the immovable property itself, regardless of where the supplier or recipient is based.

Is GST charged on services purchased from a foreign company, like a software subscription?

Yes, generally through the reverse charge mechanism — the Indian recipient is responsible for self-assessing and paying GST (typically IGST) on import of services, and can usually claim it back as ITC subject to standard conditions.

What happens if a supplier charges IGST when CGST+SGST was actually applicable, or vice versa?

This is treated as an incorrect tax type under GST law. The supplier is generally required to correct the invoice and pay the correct tax type, and mechanisms exist to adjust or refund the wrongly paid tax, though this process can be administratively time-consuming and may affect the recipient's ITC claim in the interim.

Are exports of goods and services always tax-free under GST?

Exports are zero-rated, but this status is not automatic — it depends on satisfying specific conditions (particularly around payment in convertible foreign exchange for services, and proper export documentation for goods) and either filing a valid LUT or paying IGST and claiming a refund.

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