GST GST basics
Place of supply for goods under GST
For most sales of goods, the place of supply is where the movement of goods ends for delivery to the buyer. If that is in your own state, charge CGST and SGST; if it is in another state, charge IGST.
- Traders selling across states
- Manufacturers and distributors
- Businesses with bill-to-ship-to orders
- Billing staff
- Accountants preparing GST returns
On this page 11
Why place of supply matters
GST is a tax on consumption, so the tax goes to the state where goods are consumed. The place of supply decides which state that is, and therefore which tax you charge:
- Your location and place of supply in the same state: CGST + SGST (or UTGST).
- Different states: IGST.
Charge the wrong one and you must pay the right tax again and claim a refund of the wrong one; the buyer may also lose credit. The two taxes are compared in IGST vs CGST and SGST.
The main rules for domestic supplies
| Situation | Place of supply |
|---|---|
| Goods moved by supplier, buyer or anyone else | Where the movement ends for delivery to the buyer |
| Goods delivered to a third party on the buyer's instruction (bill-to-ship-to) | Principal place of business of the buyer who gave the instruction |
| No movement of goods (for example, goods already at the buyer's site) | Where the goods are at the time of delivery |
| Goods assembled or installed at site | Where they are assembled or installed |
| Goods supplied on board a train, ship, aircraft or bus | Where the goods are taken on board |
These come from section 10 of the IGST Act. Imports and exports have their own rules: imports are taxed where the importer is located, exports are zero-rated.
Worked examples
1. Simple inter-state sale. A Jaipur trader ships goods worth ₹2,00,000 to a dealer in Ahmedabad. Movement ends in Gujarat. Place of supply 24-Gujarat; IGST at 18% = ₹36,000.
2. Bill-to-ship-to, two states. A Mumbai wholesaler orders goods from the Jaipur trader and asks him to deliver directly to the wholesaler's customer in Pune. The Jaipur trader's place of supply is the Mumbai wholesaler's principal place of business, 27-Maharashtra. IGST.
3. Bill-to-ship-to that stays local. A Delhi company orders goods from the Jaipur trader for delivery to its customer in Ajmer, Rajasthan. Goods never leave Rajasthan, but the place of supply is the Delhi company's principal place, 07-Delhi. The Jaipur trader charges IGST. The Delhi company then bills its Ajmer customer and charges IGST too, since its own place of supply is Rajasthan.
4. Installation. A Gujarat company supplies and installs a cold storage plant at a site in Madhya Pradesh. Place of supply is the installation site, 23-Madhya Pradesh. IGST.
Grey areas to watch
- Counter sales to out-of-state buyers. When a registered buyer from another state collects goods at your shop and drives them home, the question of where movement ends is debated. Retail walk-in sales are commonly treated as local supplies; for large B2B pick-ups, take advice and be consistent.
- Branch has a separate GSTIN. A sale billed from your Haryana GSTIN to a buyer in Haryana is local, even if the goods physically come from your Rajasthan godown; the dispatch is then a separate stock transfer.
- SEZ buyers. Supplies to SEZ units are treated as inter-state, even within the same state.
Recording it correctly
- Store the buyer's billing state and GSTIN in the party master.
- Record the shipping address and its state on each invoice when it differs from the billing address.
- Use the two-digit state code in place of supply fields on invoices and e-way bills. The list is in GST state codes.
- Check the place of supply on every inter-state B2C invoice above the B2C Large limit, which is reported invoice-wise.
Common mistakes
- Deciding the tax by the buyer's billing address in bill-to-ship-to cases without checking who gave the delivery instruction.
- Charging CGST + SGST because the buyer's GSTIN starts with your state code, when delivery is to another state under a different GSTIN.
- Correcting the place of supply only on the GST portal and not in the books.
This is general information, not tax advice. The rules for services are different and are not covered here.
How Cashflow OS handles it
When an authorised user creates a sales voucher in TallyPrime through Cashflow OS, GST is worked out from the item and the party's state, so a party in another state gets IGST and a local party gets CGST + SGST. The party's state therefore needs to be right in the Tally ledger. The GSTR-1 view prepared from Tally shows place of supply against each B2C line, which helps catch errors before filing.
Avoid these
Common mistakes
- MistakeUsing the delivery address in bill-to-ship-to salesDo this instead
Check who gave the delivery instruction; the place of supply is that buyer's principal place of business.
- MistakeChoosing CGST + SGST from the GSTIN's state code aloneDo this instead
Check where the goods are actually delivered under that sale, not only the first two digits of the buyer's GSTIN.
- MistakeCorrecting place of supply only on the GST portalDo this instead
Correct the invoice in your books as well, so your records and returns keep matching.
- MistakeTreating SEZ supplies in your state as localDo this instead
Supplies to SEZ units or developers are inter-state, so IGST applies or they are zero-rated under LUT.
Keep handy
Checklist
Place of supply for goods under GST — 8 checks. Tick them as you go.
In Cashflow OS
How Cashflow OS helps
Cashflow OS puts your TallyPrime books on every phone in the team. Where it fits this topic:
GST worked out from the party's state
When an authorised user creates a sales voucher through Cashflow OS, a party in another state gets IGST and a local party gets CGST + SGST, so the Tally ledger's state must be right.
See Create Tally vouchers from your phone
Check place of supply before filing
The GSTR-1 view prepared from Tally data shows place of supply against B2C lines, which helps catch errors before the return is filed on the portal.
See GST reports from your Tally data
Questions people ask
What is the place of supply if the buyer collects goods from my godown?
Is a sale to an SEZ inside my state inter-state?
What if I charged CGST and SGST instead of IGST?
What is the place of supply for goods installed at a site?
What if goods do not move at all?
My branch has its own GSTIN. Which state applies?
Do these rules apply to services?
Where do I find the state codes?
This page is general information for Indian businesses, not tax, legal or financial advice. Rules and rates change — check the official portals or your CA before acting.
