Place of supply is one of the most important — and most misunderstood — concepts in GST. It determines whether a supply is treated as within a state or between states, and that in turn decides which component of tax you charge. Get it wrong and you may charge the wrong tax, leaving your buyer unable to claim credit and yourself exposed to a demand. Here's how place of supply is determined for goods and services.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-15
Quick answer
Place of supply decides whether a transaction is inter-state or intra-state, and therefore which tax applies. Here's how the rules work for goods and services.
GST is a destination-based tax, and place of supply is the rule that locates where a supply is deemed to take place. Combined with your location as the supplier, it decides whether the transaction is intra-state — attracting the central and state components together — or inter-state, attracting the integrated component. Charging the wrong type means your buyer's credit can be blocked and you may have to pay the correct tax again while claiming a refund of the wrong one. The stakes are practical, not just technical.
For goods, the place of supply generally follows the movement: where the supply involves movement of goods, it is the location where the movement ends for delivery to the recipient. Where there is no movement, it is the location of the goods at the time of delivery. Special rules cover goods supplied on board a conveyance, goods assembled or installed at site, and bill-to-ship-to transactions where the buyer and the delivery address differ. The bill-to-ship-to situation in particular trips up many businesses, so map the actual flow of goods before deciding.
For services, the general rule is that the place of supply is the location of the recipient where the recipient is registered, and otherwise the location where the service is provided. But a long list of specific services follow their own rules — services connected to immovable property, events, transport, restaurants, and others are located by where the property, event or activity is, not where the recipient sits. Identify whether your service falls under the general rule or a special rule before deciding the place of supply.
Once you know the place of supply, compare it with your own location. If the place of supply and the supplier are in the same state, it is intra-state and you charge the central and state components. If they are in different states, it is inter-state and you charge the integrated component. The same physical transaction can be intra-state or inter-state depending on these locations, which is why place of supply must be settled first. Exports and supplies to or from special economic zones have their own treatment.
The recurring errors are charging the wrong tax type on inter-state sales, misreading bill-to-ship-to flows, and treating property- or event-linked services under the general rule. Build the place-of-supply check into your invoicing: capture the recipient's location and registration, identify the nature of the supply, and apply the correct rule before raising the invoice. Because charging the wrong component cannot simply be edited away later, the time to get place of supply right is before the invoice goes out, not after a notice arrives.
It decides whether a supply is intra-state or inter-state, and therefore whether you charge the central and state components together or the integrated component. Charging the wrong type can block your buyer's credit and expose you to paying the correct tax again.
Generally it follows the movement — the place where movement ends for delivery to the recipient — or, where there is no movement, the location of the goods at delivery. Special rules apply to bill-to-ship-to, on-board, and installed-at-site supplies.
No — that is the general rule, but many services follow special rules. Services tied to immovable property, events, transport or restaurants are located by where the property, event or activity is, not where the recipient sits.
Not sure whether to charge inter-state or intra-state tax on a transaction? Write to the firm and we'll work through the place-of-supply rules for your supplies.