Place of supply explained: when to charge CGST and SGST, and when IGST

What is place of supply under GST?

Place of supply is the state or union territory where GST law treats a sale as taking place. It is not always where you are, and not always where the buyer is. The law fixes it with rules, and you print it on every tax invoice.

You compare it with one other thing: the state you are registered in, which is the location of the supplier. That single comparison decides which tax heads go on the invoice.

When do you charge CGST and SGST, and when IGST?

If the place of supply is in the same state as the supplier, charge CGST and SGST in equal halves. If it is in a different state, charge IGST at the full rate. The rate the buyer pays is the same either way.

What is the place of supply for goods?

For goods that move, the place of supply is where the movement ends: the place the goods are delivered to the buyer. It does not matter who arranges the transport or who pays the freight.

• Goods delivered by you or your transporter: the state where delivery ends.
• Goods sold over the counter and carried away: your shop's state, because the movement ends there.
• Bill to one party, ship to another on the buyer's instructions: the principal place of business of the party you bill, not the delivery address.
• Goods installed or assembled at a site: where they are installed.
• Goods that do not move: where the goods are at the time of delivery.

What is the place of supply for services?

For a service to a registered business, the place of supply is the location of the recipient. For a service to an unregistered person, it is the recipient's address on your records, or your own location if you have none.

A few kinds of service follow their own rule instead. The common ones for a small business:

• Services on immovable property (construction, repair, renting, architects): where the property is located.
• Admission to an event, such as an exhibition or a conference: where the event is held.
• Passenger transport to an unregistered person: where the passenger boards.
• Goods transport: the recipient's location if registered, otherwise where the goods are handed over for transport.

How does place of supply work in six real invoices?

Lakshmi Steel Furnitures is the fictional Coimbatore business on this site, registered in Tamil Nadu (state code 33). Each row below is a ₹50,000 taxable supply at 18%, so the tax is always ₹9,000. Watch the head change.

Row three surprises most people. The chairs travel to Karnataka, yet the tax is CGST and SGST, because in a bill-to ship-to sale the place of supply follows the party who ordered and pays. Sri Murugan Interiors then bills its own client in Bengaluru separately, with IGST.

Row six is an export. Exports are zero-rated: either you supply under a bond or letter of undertaking (LUT) and charge no IGST, or you pay IGST of ₹9,000 and claim it back as a refund. Your CA will tell you which route suits your cash flow.

Why is the buyer's state read from the GSTIN?

The first two digits of every GSTIN are the state code of the registration, so the GSTIN tells you the buyer's registered state without anyone typing it. 33 is Tamil Nadu, 29 is Karnataka and 32 is Kerala.

A typed address can be wrong; a GSTIN is checked at registration and appears on the buyer's return. When your sales register and the buyer's input credit both carry the same state, they match. A buyer with branches in two states has two GSTINs, so pick the GSTIN of the branch you are actually billing.

What if the buyer has no GSTIN?

Without a GSTIN, the state comes from where the goods are delivered, or for services, from the buyer's address. So the address is the evidence.

• Record the buyer's full address with the state on the customer, not just a phone number
• For goods, take the state from the delivery address, not the billing address
• For over-the-counter sales, the place of supply is your own state
• For services to an unregistered person with no address on record, use your own state
• Ask a business buyer for its GSTIN before billing; a missing GSTIN also costs the buyer its input credit

What goes wrong when the place of supply is wrong?

Generally, tax charged under the wrong head is not treated as paid under the right one. If you charged CGST and SGST on a sale that was inter-state, the IGST is still due, and the CGST and SGST you paid has to be claimed back as a refund.

• You pay twice for a while. The correct tax goes out now; the wrong tax comes back only after a refund claim.
• Your buyer's credit breaks. The buyer sees CGST and SGST in GSTR-2B when its own books expect IGST, or the reverse, and may hold your payment until it is fixed.
• Your GSTR-1 needs amending, and the state-wise totals in your returns no longer agree with your sales register.

1. 1

   Find the invoices

   Check the place of supply column in the sales register against each buyer's GSTIN or delivery address.

2. 2

   Correct the document, never edit it

   Cancel the wrong invoice or issue a credit note against it, as your CA advises, then raise a fresh invoice with the right place of supply.

3. 3

   Pay under the right head

   Pay the tax under the correct head, in the period your CA advises.

4. 4

   Claim the refund

   Claim back the tax paid under the wrong head through the refund route on the GST portal.

5. 5

   Tell the buyer

   Send the new invoice so the buyer's GSTR-2B and its books match again.

How does SimpleERP choose CGST and SGST or IGST?

SimpleERP decides CGST plus SGST or IGST from the place of supply on each invoice, with the buyer's state read from the GSTIN. Nobody picks the tax head line by line.

• The place of supply and the tax split are printed on the invoice, with the HSN or SAC on every line.
• Posting the invoice writes the receivable, the sales, the GST and the stock issue in one step.
• Posted invoices cannot be edited. A wrong one is cancelled, which reverses it, and the audit history keeps both.
• The sales register and HSN summary give you the figures for GSTR-1, and the purchase register helps with the GSTR-2B check.

For a bill-to ship-to sale, check the place of supply on the invoice before you post it, since the delivery state and the place of supply differ. Read more on the GST billing software page.