Place of Supply

Definition

Place of Supply is a foundational concept under India's GST framework that determines the jurisdiction in which a supply of goods or services is deemed to take place. This determination is critical because it dictates whether a transaction is treated as an intra-state supply (attracting CGST and SGST/UTGST) or an inter-state supply (attracting IGST). The rules for determining place of supply are codified in Sections 10-14 of the Integrated Goods and Services Tax (IGST) Act, 2017.

For goods, the default place of supply is the location where the movement of goods terminates for delivery to the recipient (Section 10 of the IGST Act). For services, the rules are more nuanced and depend on the nature of the service, for instance, services related to immovable property are supplied where the property is located, while general B2B services default to the location of the recipient (Section 12 of the IGST Act). For B2C services, the default is the location of the supplier.

Correct determination of place of supply is one of the most frequent compliance challenges for Indian businesses, particularly those operating across multiple states or providing services to clients in different locations. An incorrect place of supply determination leads to paying the wrong type of tax (IGST instead of CGST/SGST or vice versa), which creates mismatches in GST returns, complicates Input Tax Credit claims for the recipient, and can result in interest and penalty under Sections 73/74 of the CGST Act.

Key Points

• Determines whether a transaction is intra-state (CGST+SGST) or inter-state (IGST), directly affecting the tax type and revenue allocation between states
• For goods involving movement, place of supply is where the movement terminates for delivery to the recipient
• For services, place of supply rules vary by service type: immovable property services, event services, transportation, and telecommunications each have specific rules
• B2B services generally default to the recipient's location; B2C services default to the supplier's location
• Exports are treated as inter-state supplies with place of supply outside India, attracting IGST (which can be claimed as refund or supplied under bond/LUT)
• Incorrect place of supply determination is one of the top reasons for GST notices and demand orders from state and central tax authorities
• Special provisions exist for goods supplied on approval basis, bill-to-ship-to transactions, and supplies in territorial waters