General information, not professional advice. GST rules, rates and due dates change by notification. Check the current position on the GST Portal or with your CA before you act on anything here.
The short version
- Supplier's location and place of supply in the same state means CGST plus SGST. Different states means IGST.
- For goods that move, the place of supply is where the movement ends for delivery to the recipient.
- For most services to a registered person, it is the recipient's location; to an unregistered person, the address on record.
- Bill-to ship-to has its own rule: the place of supply is the third party's principal place of business.
- Charging the wrong head is fixed by a credit note and a fresh invoice, not by adjusting the next bill.
The basic rule
Compare two things: your location as the supplier, and the place of supply. Same state, and the tax splits into CGST and SGST, or CGST and UTGST in a union territory. Different states, and the whole rate is IGST.
The rate is identical either way. What changes is which government gets it and which credit your buyer receives, and credit of one type cannot be used freely against liability of another, which is why this is worth getting right the first time.
Goods
- Where the movement ends. If the supply involves movement of goods, the place of supply is where the goods are delivered to the recipient.
- No movement: the location of the goods at the time of delivery.
- Assembled or installed at site: the place of installation.
- Supplied on board a conveyance: where the goods were taken on board.
- Imports: the importer's location. Exports: outside India.
The buyer's billing address does not decide it; the delivery does. A Karnataka customer taking delivery at your Karnataka counter is an intra-state supply even if their office is in Maharashtra.
Services
- To a registered person: the recipient's location, which is what their GSTIN tells you.
- To an unregistered person: the address on record, and if there is none, the supplier's location.
- Immovable property, including hotels, architecture and construction: where the property is.
- Restaurant, catering, personal grooming, fitness, beauty: where the service is performed.
- Training and events to an unregistered person: where they are held.
- Transport of passengers: where they embark for the journey.
- Telecom, banking, insurance: their own specific rules.
Bill-to ship-to
A buyer in one state asks you to deliver to their customer in another. The rule treats the goods as supplied to the third person on whose direction they were delivered: the place of supply is that person's principal place of business, so your invoice to your buyer follows their location, and the transaction is documented as bill-to ship-to. Two invoices, two places of supply, one movement of goods.
Cases with their own rule
Exports and supplies to a special economic zone are zero-rated, which is not the same as exempt: they are taxable at nil with credit available, either against a bond or letter of undertaking, or with tax paid and refunded. Supplies to and from a non-taxable territory, and services provided from or to outside India, follow the separate place-of-supply provisions for international supply.
If you charged the wrong tax
It happens: IGST charged on a local sale, or CGST and SGST on an inter-state one. The remedy is not to adjust the next invoice. Issue a credit note against the wrong invoice and raise a fresh invoice with the correct head, and where tax was paid under the wrong head, the law provides for it to be adjusted or refunded when the correct tax is paid. Tell the buyer, because their 2B will show the change.
How the app decides
AawazAI takes the buyer's state from their GSTIN, which it looks up once from the registry and stores, compares it with the state of the GSTIN you are billing from, and applies CGST and SGST or IGST accordingly. For an unregistered buyer it uses the address you recorded. You see the split on the confirmation card before the invoice exists, which is the moment to catch a wrong address.
The split decided before the bill exists
AawazAI reads the buyer's state from their GSTIN and applies CGST and SGST or IGST on the card you confirm, so a wrong head is caught before it is issued.
Frequently asked questions
How do I know whether to charge CGST and SGST or IGST?
Compare your location as supplier with the place of supply. If both are in the same state or union territory, charge CGST and SGST. If they are in different states, charge IGST at the full rate.
What is the place of supply for goods?
Where the movement of the goods ends for delivery to the recipient. If there is no movement, it is the location of the goods at the time of delivery. Installation at site fixes it at the place of installation.
What is the place of supply for services?
For a registered recipient, their location. For an unregistered recipient, the address on record, failing which the supplier's location. Services connected with immovable property, restaurant and grooming services, events and passenger transport have their own rules.
What is the bill-to ship-to rule?
Where goods are delivered to someone else on your buyer's instruction, the place of supply is the principal place of business of that third person, so your invoice to your buyer follows their location.
What if I charged IGST instead of CGST and SGST?
Issue a credit note against the incorrect invoice and raise a fresh one with the correct heads, and tell the buyer, because the change shows up in their GSTR-2B. Tax paid under the wrong head is adjusted or refunded when the correct tax is paid.