Place of Supply of Goods Under GST: Complete 2026 Guide, Rules & Examples
The Goods and Services Tax (GST) is fundamentally a destination-based consumption tax. This means that goods and services are legally taxed at the place where they are finally consumed, rather than the state where they originate. Determining this exact location is the most critical compliance step for any business operating in India.
A single error in identifying the place of supply of goods can lead to disastrous financial consequences. If you charge CGST and SGST on an invoice when IGST was applicable, you cannot simply adjust it in your next return. The law forces you to pay the correct IGST from your working capital and subsequently file a complex refund application for the wrongly paid CGST/SGST.
In this expert-led, in-depth guide, we decode the stringent statutory rules established under the IGST Act, 2017. Whether your goods are physically moving, being installed at a site, or crossing international borders, this guide provides the exact legal frameworks and real-world case scenarios you need to ensure flawless time, place, and value of supply in GST compliance in FY 2026-27.
What is the Place of Supply of Goods in GST?
What is the Place of Supply of Goods? The place of supply of goods under GST determines whether a transaction is an intra-state or inter-state supply. Because GST is a destination-based tax, the revenue accrues to the state where the goods are finally consumed, dictating whether CGST, SGST, or IGST is levied.
To accurately compute your tax liability on your GST invoice format, you must compare two critical geographic points: the Location of the Supplier and the Place of Supply.
- If both are in the same state: Intra-State Supply (CGST + SGST)
- If they are in different states: Inter-State Supply (IGST)
Let us explore the specific legal scenarios under Section 10 and Section 11 of the IGST Act, 2017.
1. Place of Supply When There Is Movement of Goods
What is the place of supply involving movement of goods? When the supply involves physical movement of goods—whether by the supplier, the recipient, or a third-party transporter—the place of supply is strictly the location where the movement of goods terminates for delivery to the recipient.
Practical Case Scenarios
Example 1: Standard Intra-State Sale
Mr. Raj (Supplier in Mumbai, Maharashtra) sells 10 TV sets to Mr. Vijay (Buyer in Nagpur, Maharashtra). The goods physically move from Mumbai and terminate in Nagpur.
Place of Supply: Nagpur (Maharashtra).
GST Applicable: Both CGST and SGST.
Example 2: Standard Inter-State Sale
Mr. Raj (Mumbai) sells 30 TV sets to Mr. Vinod (Bangalore, Karnataka). The movement terminates across the state border.
Place of Supply: Bangalore (Karnataka).
GST Applicable: IGST is charged.
Example 3: Ex-Factory Collection by Buyer
Sales Heaven Ltd. (Chennai, Tamil Nadu) purchases 100 TV sets from Mr. Raj (Mumbai). Instead of Raj delivering them, Sales Heaven Ltd. sends their own trucks to collect the goods from Raj's Mumbai factory and transports them to Chennai.
Place of Supply: Chennai (Tamil Nadu), because the movement legally terminates in Chennai.
GST Applicable: IGST.
The Bill-To Ship-To Model (Third-Party Instructions)
In modern B2B trading, a buyer often purchases goods but instructs the supplier to deliver them directly to a third party (their own client). This is known as the "Bill-To Ship-To" model, and it is governed by Section 10(1)(b).
| Supply Type | Legal Place of Supply |
|---|---|
| Goods delivered on the explicit instructions of a third party (via title transfer or documentation). | It is deemed that the third party received the goods. The Place of Supply is the principal place of business of that third party. |
Example: Third-Party Direction
Anand (registered in Lucknow, UP) orders goods from Mr. Raj (Mumbai). However, Anand instructs Raj to deliver the goods directly to Anand's client located in Nagpur (Maharashtra).
Legality: Even though the physical goods moved from Mumbai to Nagpur (both in Maharashtra), the GST law deems that the goods were supplied to Anand in UP.
Place of Supply: Lucknow, UP.
GST Applicable: Mr. Raj will charge IGST on the invoice sent to Anand.
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2. Place of Supply When There Is No Movement of Goods
What is the place of supply without movement? When the commercial transaction does not involve any physical movement of goods, the place of supply is determined strictly by the location of the goods at the time of delivery or transfer of ownership to the recipient.
This typically happens in Over-The-Counter (OTC) sales or when purchasing pre-existing infrastructure.
Example: Sale of Pre-Existing Assets
Sales Heaven Ltd. (registered in Chennai) decides to open a new branch in Bangalore. They purchase a commercial building in Bangalore that comes with pre-installed workstations and servers from the previous owner (also based in Bangalore).
Place of Supply: Bangalore.
GST Applicable: CGST + SGST (Note: While the sale of the building itself does not attract GST, the sale of the movable workstations does).
Assembly or Installation of Goods at Site
When goods are supplied in a dismantled state and require assembly or installation at a specific location, the rules shift entirely. Under Section 10(1)(d), the place of supply is strictly the place of such installation or assembly.
Example: Heavy Machinery Installation
Strong Iron & Steel Ltd. (Jharkhand) engages M/s SAAS Constructions (West Bengal) to build and install a massive blast furnace at its steel plant in Jharkhand.
Place of Supply: Jharkhand.
GST Applicable: Because the installation happens in Jharkhand, M/s SAAS must charge CGST and SGST of Jharkhand. To do this legally, M/s SAAS must obtain a GST registration in Jharkhand, often opting to register as a "Casual Taxable Person" for 90 days.
Assembly/Installation Scenario Comparison Matrix
| Scenario | Location of Supplier | Location of Recipient | Site of Installation | Place of Supply | GST Charged |
|---|---|---|---|---|---|
| Scenario 1 | West Bengal | Orissa | Jharkhand | Jharkhand | CGST + SGST (Jharkhand) |
| Scenario 2 | Jharkhand | Jharkhand | Jharkhand | Jharkhand | CGST + SGST (Jharkhand) |
| Scenario 3 | Jharkhand | Jharkhand | Orissa | Orissa | CGST + SGST (Orissa) |
| Scenario 4 | Jharkhand | Jharkhand | Tamil Nadu | Tamil Nadu | CGST + SGST (Tamil Nadu) |
3. Place of Supply – Goods Supplied on a Vessel or Conveyance
What is the place of supply on a conveyance? For goods supplied on board a moving conveyance (such as a vessel, train, aircraft, or motor vehicle), the place of supply is legally determined by the specific location where the goods are taken on board.
This rule (Section 10(1)(e)) simplifies taxation for airlines and railways, ensuring they don't have to change tax rates as the vehicle crosses state borders.
- Example 1 (Air Travel): Mr. Ajay travels from Mumbai to Delhi. He purchases onboard snacks that were loaded onto the aircraft in Mumbai. The Place of Supply is Mumbai, attracting CGST + SGST.
- Example 2 (Train Journey): Mr. Vinod, traveling to Mumbai, buys lunch at Vadodara station. However, the catering company loaded the meals onto the train back in Delhi. The Place of Supply is Delhi, attracting CGST + UTGST (Delhi is a Union Territory with a legislature).
4. Place of Supply for Imports and Exports
What is the place of supply for imports and exports? For goods imported into India, the place of supply is the location of the importer. For goods exported from India, the place of supply is the location outside India, making exports zero-rated supplies.
Section 11 of the IGST Act strictly governs cross-border transactions:
| Supply Type | Place of Supply | GST Implication |
|---|---|---|
| Goods Imported into India | Location of the Indian Importer | IGST is heavily charged alongside basic Customs Duty. |
| Goods Exported from India | Location outside India | Exports are "Zero-Rated". Exporters can claim refunds via the exports under GST mechanisms. |
Statutory Note on Invoicing: When issuing an export invoice in a foreign currency (e.g., USD), the GST portal requires the invoice to explicitly display the RBI/CBIC approved currency conversion rate and the corresponding INR values for accurate GSTR-1 reporting.
5. When Place of Supply Cannot Be Determined
In highly complex, unprecedented business models where the place of supply cannot be determined through Sections 10 or 11, the determination is made strictly in accordance with residual rules established by Parliament, based heavily on the recommendations of the GST Council.
Common Mistakes & Compliance Risks (FY 2026-27)
Applying the rules of time, place, and value of supply incorrectly leads to severe financial blockage.
- Paying the Wrong Tax Head: If you mistakenly treat an inter-state sale as an intra-state sale and pay CGST/SGST instead of IGST, you violate the law. Under Section 77 of the CGST Act, you cannot adjust this. You must pay the correct IGST immediately and apply for a refund of the wrongly paid tax using the GST wrongly paid procedures.
- E-Way Bill Mismatches: The destination PIN code on your E-way bill must perfectly match the Place of Supply declared on your tax invoice. Mismatches trigger automatic vehicle interception and heavy fines under the GST prosecution, penalty, and procedure framework.
Expert Tips for FY 2026-27 Compliance
💡 Chartered Accountant's Insight
With the GSTN portal utilizing advanced AI to match GSTR-1, E-way bills, and E-invoices in real-time, masking an inter-state supply to save on IGST is impossible in 2026. My strict advice: Always audit your Bill-To Ship-To transactions. These are the most scrutinized transactions during an assessment under GST. Maintain flawless accounts and records proving the exact termination point of the goods.
Conclusion
The place of supply is the foundational pillar of GST compliance. Whether dealing with physical movement, third-party instructions, or cross-border exports, misclassifying your tax jurisdiction directly impacts your profitability and legal standing. By strictly adhering to the IGST Act guidelines and accurately reflecting these metrics in your GSTR-3B, you safeguard your enterprise from aggressive departmental audits.
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We simplify complex GST rules so your business can avoid costly errors. Let DisyTax audit your invoicing and supply chain structure today.
Frequently Asked Questions (FAQs)
1. What is the Place of Supply of Goods under GST?
The place of supply of goods under GST determines whether a transaction is an intra-state or inter-state supply. Because GST is a destination-based tax, the revenue accrues to the state where the goods are finally consumed, dictating whether CGST, SGST, or IGST is levied.
2. How is the place of supply determined when goods are physically moved?
When the supply involves physical movement of goods—whether by the supplier, the recipient, or a transporter—the place of supply is legally determined as the location where the movement of goods terminates for delivery to the recipient.
3. How does the Bill-To Ship-To model work in GST?
In a Bill-To Ship-To model, if goods are delivered to a third party on the direction of the buyer, the GST law deems that the buyer received the goods. Thus, the place of supply is the principal place of business of that buyer, not the final physical destination.
4. What is the place of supply if there is no movement of goods?
When the commercial transaction does not involve any physical movement of goods (like selling pre-existing infrastructure or OTC sales), the place of supply is strictly the location of the goods at the time of delivery or transfer of ownership to the recipient.
5. What is the place of supply for goods installed at a site?
When goods are supplied in a dismantled state and require assembly or installation, the place of supply is strictly the geographical place of such installation or assembly, regardless of where the supplier is originally registered.
6. How is tax determined for goods supplied on a train or aircraft?
For goods supplied on board a moving conveyance (such as a vessel, train, or aircraft), the place of supply is legally determined by the specific location where the goods are physically taken on board the conveyance.
7. What is the place of supply for imports into India?
For goods imported into India from a foreign country, the place of supply is the location of the importer in India. Consequently, IGST is heavily charged alongside basic Customs Duty during the clearance process.
8. What happens if I pay CGST/SGST instead of IGST by mistake?
If you mistakenly treat an inter-state sale as an intra-state sale, you cannot adjust it in the next return. Under Section 77, you must pay the correct IGST from your working capital and apply for a formal refund of the wrongly paid CGST/SGST.
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