GST and invoicing
What is place of supply in GST? Meaning and rules
Definition
Place of supply: Place of supply is the state where GST law treats a sale as made; compared with the seller's location, it decides whether to charge CGST and SGST or IGST.
Also called: Place of supply in GST, POS state on invoice, Place of supply meaning
Why place of supply matters
GST is a tax on consumption, so the state share of the tax goes to the state where goods or services are consumed. Place of supply is the legal answer to where that is. Compare it with your own location: the same state means an intra-state sale with CGST and SGST, and different states mean an inter-state sale with IGST.
Getting it wrong is costly. If you charge CGST and SGST on a sale that turns out to be inter-state, you pay the IGST and then claim a refund of what you paid, under section 77 of the CGST Act. The wrong tax is not simply moved across.
Place of supply rules for goods
For goods sold within India, section 10 of the IGST Act sets the place of supply:
- Goods that move: where the movement ends for delivery to the buyer. A Gujarat buyer who collects goods in Mumbai and takes them home to Gujarat has Gujarat as the place of supply.
- Bill to one party, ship to another on that party's instruction: the principal place of business of the party who gave the instruction.
- Goods that do not move, such as goods already with the buyer: where the goods are at delivery.
- Goods installed or assembled at site: the site.
- Unregistered buyers: the buyer's address recorded on the invoice, or the seller's location if no address is recorded.
What to print, and common mistakes
Rule 46 requires the invoice to show the place of supply with the state name for inter-state sales, and the delivery address if it differs. Printing it on every invoice, for example as Maharashtra (27), avoids doubt. Services have their own rules; for a registered business buyer, the usual answer is the buyer's location.
Common mistakes are using the billing address when goods are delivered elsewhere, using a buyer's head office GSTIN when the goods go to its branch in another state with its own GSTIN, and forgetting that for an unregistered buyer, the address you record on the invoice decides the state.
Worked example
Three sales from one Surat godown
A Surat trader (GSTIN starting 24) sells goods with a taxable value of ₹20,000 at 18% three times in one day. Goods trucked to a retailer in Vadodara: place of supply Gujarat (24), so CGST ₹1,800 and SGST ₹1,800. Goods trucked to a retailer in Pune: place of supply Maharashtra (27), so IGST ₹3,600. A registered Pune trader who collects at the Surat godown and drives the goods to Pune: the movement ends in Maharashtra, so this is also IGST ₹3,600. The total tax is the same each time; only the split changes.
In managemate
managemate sets the place of supply on each sales invoice from the ship-to address on the order. Without a shipping address it uses the state in the customer's GSTIN, and for counter sales without a customer GSTIN, your own state. It prints the place of supply as the state name and code, such as Maharashtra (27), and chooses CGST and SGST or IGST by comparing it with the state in your GSTIN, so nobody picks the tax type by hand. Customers can have several saved billing and shipping addresses, each with its own GSTIN if needed. Because managemate follows the ship-to state, check bill-to ship-to orders, where goods go to a third party on the buyer's instruction, with your accountant.
Where this shows up in managemate
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