Place of Supply — Determining CGST/SGST vs IGST
How to determine whether a transaction is intrastate or interstate and which tax applies — with rules for goods, services, and special cases
Learning Objectives
- Understand why Place of Supply (POS) is the single most important concept in GST after registration
- Apply POS rules for goods to determine intrastate vs interstate
- Apply POS rules for services in general and specific scenarios
- Correctly classify each of Sunrise Retail's transactions as CGST+SGST or IGST
- Avoid the most common GST error — charging wrong tax type
Why Place of Supply Matters
In GST, whether you charge CGST + SGST or IGST depends entirely on the Place of Supply (POS):
| Transaction type | Rule |
|---|---|
| POS = State of supplier | Intrastate → CGST + SGST |
| POS ≠ State of supplier | Interstate → IGST |
Getting POS wrong is a serious compliance error. If you charge CGST+SGST when you should charge IGST (or vice versa), your buyer cannot claim ITC correctly and you have deposited tax to the wrong government.
POS Decision Table — Which Tax Applies?
Use this table as a quick reference before issuing any invoice:
| Supply Type | B2B or B2C? | Same State? | Tax Applied |
|---|---|---|---|
| Goods — with movement | B2B (buyer has GSTIN) | Yes (delivered same state) | CGST + SGST |
| Goods — with movement | B2B (buyer has GSTIN) | No (delivered to other state) | IGST |
| Goods — with movement | B2C (buyer unregistered) | Yes | CGST + SGST |
| Goods — with movement | B2C (buyer unregistered) | No, value > ₹2.5L | IGST (report in GSTR-1 Table 5) |
| Goods — with movement | B2C (buyer unregistered) | No, value ≤ ₹2.5L | IGST (report in GSTR-1 Table 7 consolidated) |
| Services — general rule | B2B | Recipient's GSTIN state = supplier state | CGST + SGST |
| Services — general rule | B2B | Recipient's GSTIN state ≠ supplier state | IGST |
| Services — general rule | B2C | Recipient address same state | CGST + SGST |
| Services — general rule | B2C | Recipient address different state | IGST |
| Immovable property services | Any | Property in supplier's state | CGST + SGST |
| Immovable property services | Any | Property in another state | IGST |
| Restaurant services | Any | Restaurant in supplier's state | CGST + SGST (always) |
| Supply to SEZ unit | Any | Even same state as SEZ | IGST (always — zero-rated) |
| Export of goods/services | Any | Always | IGST at 0% (zero-rated) |
Section 10 — Place of Supply for Goods
General Rule — Goods Involving Movement
When goods are transported from one location to another:
POS = Location where goods are delivered (destination)
The movement of goods ends at the buyer's delivery address. That state is the POS.
Examples using Sunrise Retail (registered in Telangana — 36):
| Transaction | From | Delivered to | POS | Tax type |
|---|---|---|---|---|
| Sale to Digital Hub, Secunderabad | Telangana | Telangana | Telangana (36) | CGST 9% + SGST 9% |
| Sale to CloudStore, Bangalore | Telangana | Karnataka | Karnataka (29) | IGST 18% |
| Sale to walk-in customer, Hyderabad | Telangana | Telangana | Telangana (36) | CGST 9% + SGST 9% |
| Purchase from TechWorld, Mumbai | Maharashtra | Telangana | Telangana (36) | IGST 18% (on TechWorld's invoice) |
Goods Without Movement (Bill-to and Deliver-to Same Location)
POS = Location of the goods at the time of supply
If a buyer purchases goods already sitting in a warehouse in another state, POS is where the goods are located at transfer.
Goods Assembled or Installed at Site
POS = Location of installation/assembly
If Sunrise Retail orders a custom server rack to be installed in its Hyderabad office (assembly done at Hyderabad), POS = Telangana.
Goods on Board a Conveyance
Goods supplied on ships, aircraft, or trains (food, beverages):
POS = Location where goods are taken on board
Section 12 — Place of Supply for Services
Services are more complex because they have no physical delivery. Section 12 provides both a general rule and specific rules for particular services.
General Rule for Services
POS = Location of the recipient of service
If the recipient is registered (has a GSTIN), POS = state of their GSTIN registration. If the recipient is unregistered, POS = state of the recipient's address on record (or supplier's location if address unavailable).
Sunrise Retail example:
Sunrise Retail (Telangana) hires a digital marketing agency in Mumbai to run Facebook ads.
- Sunrise Retail is the recipient — registered in Telangana (36)
- POS = Telangana (recipient's state)
- Marketing agency charges IGST (their state Maharashtra ≠ POS Telangana)
- Sunrise Retail sees IGST on invoice → can claim IGST ITC in GSTR-3B Table 4
Specific Rules for Particular Services
Several services have their own POS rules that override the general rule:
1. Immovable Property Services
Services directly related to immovable property — construction, renting, architect fees, interior design:
POS = Location of the property
If a Chennai-based architect designs a building in Hyderabad:
- POS = Hyderabad (Telangana)
- Tamil Nadu architect charges IGST (their state ≠ Telangana)
2. Restaurant and Catering Services
POS = Location where services are actually performed
Restaurant tax goes to the state where the restaurant is located, regardless of where the customer is from.
3. Training and Educational Services
POS = Location where services are performed (if recipient is unregistered)
Sunrise Retail's staff attends a GST training workshop in Bangalore:
- If Sunrise Retail provides GSTIN → POS = Telangana (recipient's registered state)
- If no GSTIN given → POS = Karnataka (where service is performed)
4. Admission to Events
POS = Location where the event is held
5. Transportation of Goods
| Recipient | POS |
|---|---|
| Registered recipient | Location of registered recipient |
| Unregistered recipient | Location where goods are handed over for transport |
6. Transportation of Passengers
POS = Location where the passenger embarks
7. Telecom Services
POS = Location of the billing address of the subscriber
8. Banking and Financial Services
POS = Location of the service recipient (if known); otherwise location of supplier
POS for Specific Service Types — Master Reference Table
The general rule (POS = recipient's location) is overridden for several categories. Use this table as the single reference whenever the service crosses state lines:
| Service Category | POS Rule | Practical Example |
|---|---|---|
| Immovable property services (architects, interior designers, contractors, valuers, brokers, hotel rooms, marriage halls, renting of property) | Location of the property | Chennai architect designs Hyderabad office → POS = Telangana → IGST |
| Restaurant / catering / personal grooming (salons, gyms, spa) | Location where services are actually performed | Hyderabad restaurant serves Delhi tourist → POS = Telangana → CGST + SGST |
| Training & performance appraisal — B2B (recipient registered) | Location of the recipient | A training firm in Mumbai trains Sunrise Retail's Hyderabad staff via webinar → POS = Telangana (SR's GSTIN state) → IGST |
| Training & performance appraisal — B2C (recipient unregistered) | Location where services are performed | Same training delivered to a Delhi resident attending in Bangalore → POS = Karnataka → IGST (supplier in Maharashtra) |
| Events / exhibitions / amusement parks / sporting events / cultural events (admission and organising both) | Location where the event is held | Tech conference organised in Bangalore → POS = Karnataka, regardless of organiser's location |
| Transportation of goods — recipient registered | Location of the registered recipient | GTA in Delhi transports goods for Sunrise Retail → POS = Telangana → IGST |
| Transportation of goods — recipient unregistered | Destination of the goods (where movement ends) | GTA hired by a Hyderabad walk-in customer to ship goods to Pune → POS = Maharashtra → IGST |
| Passenger transportation (flights, trains, buses where the journey starts in India) | Place of embarkation — where the passenger boards | Hyderabad → Bangalore flight: POS = Telangana (boarding point) → CGST + SGST charged by airline based in Telangana, IGST if airline based elsewhere |
| Telecom & broadcasting — post-paid | Location of billing address of subscriber | Airtel postpaid bill for a Hyderabad subscriber → POS = Telangana, regardless of where calls were made |
| Telecom & broadcasting — pre-paid (recharge) | Where payment is received / Where the SIM is issued | Pre-paid recharge done online from a Telangana customer's wallet → POS = Telangana |
| Banking & financial services — registered recipient | Location of the recipient | Bank charges to Sunrise Retail's current account → POS = Telangana |
| Banking & financial — unregistered recipient (insurance, retail banking) | Location of supplier | LIC sells policy to a Hyderabad walk-in (unregistered) → POS = location of LIC branch where bought |
| Online information & database access (OIDAR) | Location of the recipient (when known); otherwise default rules apply | Foreign software subscription to Sunrise Retail → POS = Telangana → IGST under RCM |
| Insurance services | Location of registered recipient OR location of supplier for unregistered | Auto insurance to Sunrise Retail (registered) → POS = Telangana (SR's state) |
| Goods imported by post / courier | POS = location of the recipient | International courier delivery to Sunrise Retail's Madhapur office → POS = Telangana |
The 3-question heuristic: before raising any cross-state service invoice, ask: (1) Is this a specific service type with its own POS rule? (2) Is the recipient registered (GSTIN-known) or unregistered? (3) For physical services — where is the activity actually performed? Answering these in order routes every service to its correct POS.
OIDAR Services & Import of Services
| Scenario | Who pays GST | How |
|---|---|---|
| Foreign supplier → Indian B2B recipient (registered) | Indian recipient | IGST on Reverse Charge basis (Section 5(3) IGST Act) — recipient self-assesses, pays via GSTR-3B Section 3.1(d), claims ITC in Section 4(A)(4) the same month |
| Foreign supplier → Indian B2C unregistered recipient | Foreign supplier (forward charge) | Foreign supplier must register in India under Simplified OIDAR Registration (Form GST REG-10) and collect 18% IGST from the Indian customer — no RCM by the customer |
| Indian supplier → Indian recipient | Indian supplier (forward charge) | Normal GST treatment — not OIDAR-specific |
| Indian supplier → Foreign recipient | Indian supplier — but it's an export of service (zero-rated) | Treat under LUT or claim IGST refund |
Why Two Different Routes?
The split between B2B (RCM by recipient) and B2C (forward charge by supplier) exists because:
- B2B Indian recipients are already in the GST system and can be made liable via RCM — no need to chase the foreign supplier
- B2C unregistered consumers can't be made liable for RCM (they're not registered, can't file GSTR-3B). So the law shifts the burden to the foreign supplier via a simplified OIDAR registration scheme
Examples Sunrise Retail Will Hit
| Service Provider | What They Provide | Sunrise Retail's GST Treatment |
|---|---|---|
| Google Ireland (Google Ads) | Online advertising platform | OIDAR + Import of services → IGST 18% under RCM (₹21,600 on ₹1,20,000 spend) |
| Amazon Web Services (AWS) — Ireland | Cloud hosting | OIDAR + Import → IGST 18% under RCM |
| Zoom Communications — US | Video conferencing subscription | OIDAR + Import → IGST 18% under RCM |
| Microsoft Ireland (Office 365) | SaaS productivity suite | OIDAR + Import → IGST 18% under RCM |
| Adobe Ireland (Creative Cloud) | Design SaaS | OIDAR + Import → IGST 18% under RCM |
For each of these, the foreign supplier's invoice will NOT show Indian GST (because they're not Indian-registered). Sunrise Retail self-assesses the 18% IGST on the invoice value, pays via GSTR-3B Section 3.1(d), and claims it back as ITC in Section 4(A)(4) the same month. Net cash impact: zero (because ITC is eligible) — but the discipline of recording these in the RCM register is mandatory.
Common mistake: Treating a foreign SaaS subscription as a normal expense without any GST entry — because "the invoice didn't show GST". The recipient's silence here triggers a notice in audit. Every imported service is subject to GST under RCM (with very rare exceptions for specific exempt services like education and healthcare from notified foreign providers).
Supply to a SEZ or SEZ Developer
Supplies to a Special Economic Zone unit or developer are treated as interstate supply regardless of where the SEZ is located.
Even if supplier is in the same state as the SEZ, IGST applies (not CGST+SGST).
This is because SEZ supplies are zero-rated — treated like exports.
Sunrise Retail — Complete POS Analysis
💼 Sunrise Retail Pvt Ltd, GSTIN: 36AACCS1234A1ZP — Telangana
April 2025 Transactions
| # | Transaction | Supplier | Recipient | POS | Tax Applied |
|---|---|---|---|---|---|
| 1 | Sale of 30 phones to Digital Hub, Secunderabad | SR (TN) | Digital Hub (TN) | Telangana | CGST 9% + SGST 9% |
| 2 | Sale of 20 phones to CloudStore, Bangalore | SR (TN) | CloudStore (KA) | Karnataka | IGST 18% |
| 3 | Purchase of phones from TechWorld, Mumbai | TechWorld (MH) | SR (TN) | Telangana | IGST 18% |
| 4 | Office rent — Madhapur, Hyderabad landlord | Landlord (TN) | SR (TN) | Telangana | CGST 9% + SGST 9% |
| 5 | Digital marketing from Mumbai agency | Agency (MH) | SR (TN) | Telangana | IGST 18% |
| 6 | Electricity bill — TSSPDCL, Hyderabad | TSSPDCL (TN) | SR (TN) | Telangana | CGST 9% + SGST 9% |
TN = Telangana, MH = Maharashtra, KA = Karnataka
Key Insight for Sunrise Retail
All domestic sales in Telangana → CGST+SGST. Interstate sales to other states → IGST. Most of their purchases (from Mumbai suppliers) → IGST. This IGST ITC can offset IGST output (CloudStore sales) first, then remaining can offset CGST/SGST output.
Common POS Errors
| Error | Consequence | Fix |
|---|---|---|
| Charging CGST+SGST on interstate sale | Wrong tax deposited; buyer can't claim ITC | Issue amended invoice with IGST |
| Charging IGST on intrastate sale | Wrong split of tax between Centre and State | Issue amended invoice with CGST+SGST |
| Not asking buyer's GSTIN | POS defaults to supplier's state for registered buyers | Always collect GSTIN before invoicing |
| Using supplier's state as POS for services | Only valid if recipient has no address on record | Use recipient's registered state |
Practice Exercise
Exercise 1: Sunrise Retail receives a legal consultancy bill from a Delhi-based lawyer (fee: ₹40,000). Sunrise Retail is registered in Telangana. What is the POS and which tax applies?
Show Solution
- Service: Legal consultancy
- Recipient: Sunrise Retail, registered in Telangana
- General rule for services → POS = Location of recipient = Telangana
- Supplier (lawyer) is in Delhi; POS is Telangana → Interstate → IGST applies
- Lawyer charges IGST 18% = ₹7,200 IGST
- Sunrise Retail can claim ₹7,200 IGST ITC (legal services from an advocate — check RCM applicability)
Exercise 2: Sunrise Retail rents a warehouse in Pune (Maharashtra) to store phones for delivery to Pune-area customers. The warehouse owner is in Maharashtra; Sunrise Retail is the registered tenant. What is the POS for the warehouse rent?
Show Solution
- Service: Renting of immovable property (warehouse)
- Specific rule: Immovable property services → POS = Location of the property = Maharashtra
- Sunrise Retail is the recipient (Telangana GSTIN) but the specific rule overrides the general rule
- Since Sunrise Retail's location (Telangana) ≠ POS (Maharashtra) → IGST applies
- The Maharashtra warehouse owner charges IGST on the rental invoice
Exercise 3: A customer walks into Sunrise Retail's Hyderabad store, shows an Andhra Pradesh address but gives no GSTIN (unregistered buyer). He buys a phone for ₹20,000. What is the POS?
Show Solution
- Unregistered recipient — address shown: Andhra Pradesh
- General rule for services applies: POS = recipient's address on record = Andhra Pradesh
- But wait — this is a goods transaction
- Goods rule: POS = where goods are delivered
- Goods are picked up at the Hyderabad store → delivered in Hyderabad = Telangana
- CGST 9% + SGST 9% applies on ₹20,000
- The buyer's address (AP) is irrelevant because the goods are not transported to AP
Key Terms
| Term | Meaning |
|---|---|
| Place of Supply (POS) | The location that determines which state receives the GST revenue |
| Intrastate supply | Supplier state = POS state → CGST + SGST |
| Interstate supply | Supplier state ≠ POS state → IGST |
| Section 10 | POS rules for goods (CGST Act) |
| Section 12 | POS rules for services to persons within India |
| Section 13 | POS rules for services involving cross-border transactions |
| SEZ | Special Economic Zone — supplies to SEZ are always IGST (zero-rated) |
Module Summary
- Place of Supply determines which government gets the GST — never guess it
- For goods: POS = delivery location (where goods end up)
- For services — general rule: POS = location of the registered recipient's GSTIN
- Specific services (property, restaurants, transport, telecom) have their own POS rules that override the general rule
- Getting POS wrong causes ITC mismatches for the buyer and tax-type mismatches for the government
- All of Sunrise Retail's Telangana sales → CGST+SGST; Karnataka/other state sales → IGST
Checklist — what you should now be able to do:
- Apply the POS decision table to any invoice before raising it
- Determine POS for the 8 specific service categories that override the general rule
- Identify when a same-city transaction still attracts IGST (SEZ supply)
- Fix a POS error after invoice issuance — know which amended return to file
- Explain why POS for restaurant services is always the state of the restaurant, not the customer
Quick Quiz
1. Sunrise Retail sells phones delivered to a buyer in Karnataka. The POS is:
- a) Telangana (supplier's state)
- b) Karnataka (delivery state)
- c) Depends on the buyer's GSTIN
- d) Central India
Answer
b) Karnataka — for goods, POS is the delivery location, regardless of where the supplier is registered.
2. A Mumbai-based IT company provides software maintenance services to Sunrise Retail (Telangana GSTIN). What tax does the IT company charge?
- a) CGST + SGST (Maharashtra rates)
- b) IGST
- c) CGST only
- d) No tax — IT services are exempt
Answer
b) IGST — POS = recipient's state = Telangana; supplier is in Maharashtra; different states → IGST.
3. A restaurant in Hyderabad serves food to a customer who shows a Delhi address. Which tax applies?
- a) IGST (customer is from Delhi)
- b) CGST + SGST (Telangana rates)
- c) CGST only
- d) No tax — food is exempt
Answer
b) CGST + SGST (Telangana) — for restaurants, POS is where the service is performed (Hyderabad, Telangana), not the customer's home state.
4. A Chennai interior designer is contracted to design Sunrise Retail's new Hyderabad showroom. What is the POS?
- a) Tamil Nadu (designer's state)
- b) Telangana (recipient's registered state)
- c) Telangana (location of the property)
- d) Depends on the contract value
Answer
c) Telangana (location of the property) — for immovable property services, the specific rule overrides the general rule: POS = where the property is located.
5. Sunrise Retail supplies phones to an SEZ unit in the same city (Hyderabad). Which tax applies?
- a) CGST + SGST — same city, same state
- b) IGST — SEZ supplies are always interstate
- c) No tax — SEZ is exempt
- d) Depends on SEZ registration
Answer
b) IGST — supplies to SEZ are deemed interstate supply regardless of physical location. They are zero-rated (IGST at 0% if under LUT, or pay and claim refund).