Learn how to determine the place of supply for goods under GST. This guide explains rules for transit, stationary goods, and exports to ensure compliance.
The place of supply of goods decides whether a transaction attracts IGST (inter-state) or CGST plus SGST (intra-state). For goods, it is generally the location where the movement of goods terminates for delivery to the recipient, with special rules for bill-to-ship-to and no-movement cases. This guide explains the place of supply rules for goods.
Goods and Services Tax (GST) operates as a consumption-based tax, meaning that taxes are applied where goods or services are ultimately consumed, rather than at their point of origin. This principle grants the consuming state the authority to collect GST. Consequently, establishing the correct ‘place of supply’ is fundamental within the GST framework, as it dictates whether a transaction qualifies as intra-state (within a state) or inter-state (between states). This classification, in turn, determines the appropriate levy of SGST, CGST, or IGST.
Supply Location for Moving Goods
When goods are in transit, the determination of the supply location is based on where the movement concludes for delivery to the recipient.
| Supply Characteristic | Supply Location |
|---|---|
| Goods moving, transported by any party (supplier, buyer, or other) | The precise location of the goods when their movement ceases for final delivery to the receiver. |
| Goods delivered by the seller to a buyer based on a third party’s instruction (e.g., via title transfer) | It is assumed the third party has received the goods. The place of supply is the principal place of business of this third party. |
Intra-state Sales Example
Consider Mr. Raj from Mumbai, Maharashtra, selling 10 televisions to Mr. Vijay in Nagpur, Maharashtra. The supply location is Nagpur, Maharashtra. Since both parties are within the same state, CGST and SGST will be applied.
Inter-state Sales Example
If Mr. Raj from Mumbai, Maharashtra, sells 30 televisions to Mr. Vinod in Bangalore, Karnataka, the supply location is Bangalore, Karnataka. As this is an inter-state transaction, IGST will be charged.
Third-Party Delivery Instructions Example
Anand in Lucknow (Uttar Pradesh) purchases items from Mr. Raj in Mumbai (Maharashtra), instructing Mr. Raj to deliver them to Nagpur (Maharashtra). In this scenario, it is presumed that Anand, the buyer in Lucknow, has received the goods. The place of supply is Lucknow, Uttar Pradesh, and IGST will be levied.
Ex-Factory Pickup Example
Mr. Raj in Mumbai, Maharashtra, receives an order for 100 televisions from Sales Heaven Ltd. in Chennai, Tamil Nadu. Sales Heaven Ltd. arranges its own transport to pick up the TVs directly from Mr. Raj’s factory. Even though the goods are picked up in Maharashtra, the movement for delivery to the recipient (Sales Heaven Ltd.) concludes in Chennai, Tamil Nadu. Therefore, Chennai, Tamil Nadu, is the place of supply, and IGST applies.
E-commerce Sale Example
Mr. Raj from Mumbai, Maharashtra, orders a mobile phone from Amazon to be delivered as a gift to his mother in Lucknow (Uttar Pradesh). M/s ABC (an online seller registered in Gujarat) processes this order. Similar to the third-party instruction example, it is assumed that Mr. Raj, the buyer in Mumbai, has received the goods. The place of supply is Mumbai, Maharashtra, and IGST is applicable.
Supply Location for Immovable or Installed Goods
When goods do not move, or are assembled/installed at a specific site, the supply location is determined differently.
| Supply Characteristic | Supply Location |
|---|---|
| No movement of goods, by either supplier or recipient | The exact physical location of the goods at the moment of delivery to the recipient (when ownership transfers). |
| Goods requiring on-site assembly or installation | The specific site where the installation or assembly takes place. |
Example: No Goods Movement
Sales Heaven Ltd. (Chennai) establishes a new showroom in Bangalore. They acquire a building with pre-installed workstations from ABC Realtors (Bangalore). The supply location for the workstations is Bangalore. As there is no physical movement of these goods, the supply is considered to occur where they are located at the time of transfer to the receiver. (Note: GST does not apply to the purchase of a building itself, but commercial space rent is subject to GST.)
Example: Goods Installation
Strong Iron & Steel Ltd. (Jharkhand) contracts M/s SAAS Constructions (West Bengal) to construct a blast furnace at their steel plant in Jharkhand. The supply location is Jharkhand. Despite M/s SAAS being based in West Bengal, the blast furnace is installed on-site in Jharkhand, which dictates the place of supply. (Note: M/s SAAS would need to register in Jharkhand, potentially as a casual taxable person, for this contract.)
Illustrative Table for On-site Assembly/Installation
| Particulars | Supplier Location | Recipient Location | Assembly/Installation Site | Place of Supply | Applicable GST |
|---|---|---|---|---|---|
| Goods assembled or installed at site | West Bengal | Orissa | Jharkhand | Jharkhand | CGST+SGST (Jharkhand) |
| Goods assembled or installed at site | Jharkhand | Jharkhand | Jharkhand | Jharkhand | CGST+SGST (Jharkhand) |
| Goods assembled or installed at site | Jharkhand | Jharkhand | Orissa | Orissa | CGST+SGST (Orissa) |
| Goods assembled or installed at site | Jharkhand | Jharkhand | Tamil Nadu | Tamil Nadu | CGST+SGST (Tamil Nadu) |
| Goods assembled or installed at site | Jharkhand | Tamil Nadu | Jharkhand | Jharkhand | CGST+SGST (Jharkhand) |
Supply Location for Goods on Conveyances
When goods are supplied aboard a moving vehicle, vessel, or aircraft, the place of supply is where the goods were loaded onto that conveyance.
| Supply Characteristic | Supply Location |
|---|---|
| Goods supplied on a vessel, train, aircraft, or motor vehicle | The location where such goods were initially taken on board the conveyance. |
Example: Airplane Purchase
Mr. Ajay is flying from Mumbai to Delhi and buys coffee and snacks during the flight. The airline is registered in both Mumbai and Delhi. The place of supply is Mumbai, as this is where the food items were loaded onto the aircraft. CGST and SGST will be charged. (Most airlines have a pan-India presence, leading to CGST & SGST application.)
Example: Train Purchase
Mr. Vinod boards a train in Vadodara (Gujarat) en route to Mumbai and buys lunch. The lunch was loaded onto the train in Delhi. The place of supply is Delhi, where the food items were boarded. CGST and UTGST will be charged (assuming Delhi is a Union Territory for UTGST purposes). (Indian Railways also has a pan-India presence, so CGST & SGST applies, regardless of the buyer’s registration.)
If the place of supply cannot be determined for any reason, Parliament rules, based on GST Council recommendations, will govern its determination.
Supply Location for International Trade (Imports and Exports)
For goods entering or leaving India, specific rules apply to determine the place of supply.
- For goods imported into India, the supply location is the importer’s physical location.
- For goods exported from India, the supply location is considered to be outside India.
| Supply Type | Supply Location | Applicable GST |
|---|---|---|
| Goods imported into India | Location of the importer | Always IGST is charged for imports |
| Exported from India | Location outside India | Exports are eligible for GST refund |
When an Indian entity issues an invoice in foreign currency, GST can also be charged in that foreign currency. However, the invoice must also display the Indian Rupee (INR) conversion rate and the corresponding INR values.
Example: Import
Ms. Malini imports school bags from China for her shop, which is registered in Mumbai. The place of supply is Mumbai, and IGST will be applied.
Example: Export
Ms. Anita from Kolkata exports Indian perfumes to the UK. The place of supply is the UK, and GST on this export is exempt.
Frequently Asked Questions
What is place of supply for goods?
Generally where the movement of goods ends for delivery to the recipient.
Why does place of supply matter?
It determines whether IGST or CGST+SGST applies to the transaction.
What is the bill-to-ship-to rule?
Where goods are delivered to a third party on a buyer’s instruction, the place of supply is the buyer’s location.
What if there is no movement of goods?
The place of supply is the location of the goods at the time of delivery to the recipient.
