GST Place of Supply Rules Explained: Complete Guide for Goods, Services, E-Commerce & Digital Businesses (2026)

GST Place of Supply Rules Explained: Complete Guide for Businesses (2026) Determining the correct Place of Supply (POS) under GST is one of the most consequential compliance decisions a business makes in India. Get it wrong — and you face incorrect tax collection, invalid invoices, Input Tax Credit (ITC) denial, GST notices, interest liabilities, and penalties that can run into lakhs. This guide explains every Place of Supply rule under the IGST Act, 2017 — covering domestic goods, services, SaaS, e-commerce, freelancers, and cross-border transactions — with practical examples drawn from real business scenarios.

Table of Contents

What is Place of Supply Under GST? Why Place of Supply Matters (Legal + Financial Impact) Interstate vs Intrastate Supply — Core Concepts Section 10: Place of Supply Rules for Goods Section 11: Imported and Exported Goods Section 12: Place of Supply for Services (Both Parties in India) Section 13: Place of Supply When Supplier or Recipient is Outside India Special Rules: Immovable Property, Events, Telecom, Banking GST Place of Supply for Freelancers GST Place of Supply for SaaS Companies GST Place of Supply for E-Commerce Sellers GST Calculation Examples — Interstate vs Intrastate 2026 Updates: What Changed Common Mistakes and How to Avoid Them Quick Reference: POS Rules Summary Table Frequently Asked Questions

1. What is Place of Supply Under GST? Place of Supply (POS) is the legally defined location where a supply of goods or services is deemed to have taken place under the Goods and Services Tax framework. GST is a destination-based tax — meaning tax flows to the state where goods or services are consumed, not where they originate. The Place of Supply mechanism implements this principle by determining:

Whether a transaction is interstate or intrastate Which type of GST applies — IGST, or CGST + SGST/UTGST Which state government receives the GST revenue How transactions are reported in GST returns (GSTR-1, GSTR-3B) Whether the recipient can claim Input Tax Credit correctly

The rules are governed by Sections 10–14 of the IGST Act, 2017: SectionCoversSection 10Domestic supply of goods (within India)Section 11Goods imported into or exported from IndiaSection 12Services — both supplier and recipient in IndiaSection 13Services — supplier or recipient outside IndiaSection 14Special rules for OIDAR (Online Information and Database Access or Retrieval) services

2. Why Place of Supply Matters — Legal and Financial Impact Many businesses assume GST depends only on where the supplier is located. This is incorrect. GST law simultaneously considers:

Location of the Supplier Place of Supply

Both together determine whether IGST or CGST+SGST applies. A mismatch causes a chain of compliance problems:

Wrong GST charged → Invalid invoice → ITC denied to buyer IGST charged instead of CGST+SGST → Revenue goes to wrong government → Demand notice CGST+SGST charged instead of IGST → State tax collected incorrectly → Penalty + interest Incorrect returns filed → GSTR-1 and GSTR-3B mismatch → Scrutiny Customer disputes → Buyer's ITC claim rejected → Relationship damaged

For this reason, Place of Supply must be determined before generating any GST invoice.

3. Interstate vs Intrastate Supply This is the foundational concept that everything else builds on. Interstate Supply A supply is interstate when the supplier location and the Place of Supply are in different states or union territories. Applicable Tax: IGST only Example:

Supplier registered in: Maharashtra Place of Supply: Karnataka Result: Interstate → IGST applies

Intrastate Supply A supply is intrastate when the supplier location and the Place of Supply are in the same state. Applicable Taxes: CGST + SGST (or UTGST for union territories) Example:

Supplier registered in: Karnataka Place of Supply: Karnataka Result: Intrastate → CGST + SGST apply

The Simple Decision Rule Supplier State == Place of Supply State? YES → CGST + SGST NO → IGST

Important: This rule has exceptions, particularly for imports, exports, special economic zones, and specific service categories. These are covered in the sections below.

4. Section 10: Place of Supply Rules for Goods (Domestic) Section 10 of the IGST Act governs Place of Supply for goods transacted within India (other than imports/exports). General Rule — Movement of Goods When goods involve movement, the Place of Supply is the location where movement of goods terminates for delivery to the recipient. Example:

Supplier: Delhi Goods delivered to: Tamil Nadu Place of Supply: Tamil Nadu GST: IGST (interstate)

When No Movement Involved When goods are supplied without movement (e.g., goods already at the buyer's location), the Place of Supply is the location of the goods at the time of delivery. Bill-To Ship-To Transactions (Section 10(1)(b)) This is one of the most commonly misunderstood rules. It applies when:

The invoice is issued to Person A (the buyer) But goods are delivered to Person B (a third party) on the direction of Person A

In this case:

First supply (Supplier → Person A): Place of Supply is the location of Person A (the principal buyer) Second supply (Person A → Person B): Place of Supply is the location of Person B (the ultimate recipient)

Practical Example: A Mumbai-based distributor (Person A) orders goods from a Delhi manufacturer (Supplier) and directs delivery to a retailer in Pune (Person B).

Supplier to Distributor: Interstate → IGST (Delhi to Maharashtra) Distributor to Retailer: Intrastate → CGST + SGST (both in Maharashtra)

Why it matters: Businesses that issue one invoice but ship to a third location often charge wrong GST, leading to ITC disputes for all parties in the chain. Goods Assembled or Installed at Site When goods are supplied with installation or assembly and the installation happens at a fixed location, the Place of Supply is the location of installation or assembly. Example: Industrial equipment supplied from Gujarat and installed at a factory in Rajasthan → Place of Supply is Rajasthan → IGST applies.

5. Section 11: Imported and Exported Goods Imports For goods imported into India, the Place of Supply is the location of the importer. Applicable taxes: IGST + Customs Duty Exports For goods exported from India, the Place of Supply is the location outside India (the export destination). Exports are treated as zero-rated supplies. No IGST is charged, but the exporter can claim a refund of input taxes paid.

6. Section 12: Place of Supply for Services (Both in India) Section 12 applies when both the service supplier and service recipient are located in India. It has a general rule and several specific overrides for particular service categories. General Rule — Section 12(2) Recipient TypePlace of SupplyRegistered recipientLocation of the recipient (their registered place of business)Unregistered recipientRecipient's address on record; if unavailable, the supplier's location Example:

IT consultant in Telangana provides services to a company in Maharashtra Recipient is GST-registered Place of Supply: Maharashtra GST: IGST (interstate)

Specific Service Rules Under Section 12 Section 12 overrides the general rule for these specific service types: Immovable Property Services — Section 12(3) For services directly related to immovable property (construction, architecture, interior design, real estate agents, hotel accommodation, etc.): Place of Supply = Location of the immovable property Example: A Bengaluru-based architect designs a building for a client's property in Goa → Place of Supply is Goa → IGST applies (Karnataka to Goa). Restaurant and Catering Services — Section 12(4) Place of Supply = Location where services are actually performed Example: A Delhi caterer provides services at a wedding venue in Agra → Place of Supply is Agra, Uttar Pradesh → IGST applies. Training and Performance Events — Section 12(5) For admission to events, cultural programs, educational training, and similar services: Place of Supply = Location where the event is held Example: A Mumbai company sends employees to a training program in Hyderabad → Place of Supply is Hyderabad, Telangana → IGST applies. Transportation of Goods — Section 12(8)

To a registered recipient: Place of Supply = Recipient's location To an unregistered recipient: Place of Supply = Location where goods are handed over for transport

Passenger Transportation Services — Section 12(9)

Registered recipient: Location of the recipient Unregistered recipient: Place where the passenger embarks for continuous journey

Telecom Services — Section 12(11) Three categories, each with distinct rules: Telecom TypePlace of SupplyFixed-line servicesLocation where the terminal/line is installedMobile/portable servicesLocation of billing address of the subscriberInternet services (pre-paid)Location where top-up/recharge is received Banking and Financial Services — Section 12(12) Place of Supply = Location of the recipient on record with the service provider If recipient's location is not on record: Location of the supplier On-Board Services (Aircraft/Ship/Train) — Section 12(10) Place of Supply = Location of the first scheduled point of departure of the conveyance

7. Section 13: Cross-Border Services Section 13 applies when either the supplier or the recipient of a service is located outside India. General Rule — Section 13(2) Place of Supply = Location of the recipient This is the most important rule for Indian businesses serving foreign clients. Example:

Indian SaaS company in Hyderabad provides software to a US client Recipient is located in the US Place of Supply: United States Classification: Export of services (zero-rated if paid in foreign currency)

Intermediary Services — Finance Act 2026 Update

2026 Update: The Finance Act, 2026 (effective March 30, 2026) amended Place of Supply rules for intermediary services. Previously, these services faced a structural issue where Indian agents serving foreign clients were required to charge 18% IGST, making exports economically unviable. Under the amendment, intermediary services (agents, brokers, commission agents facilitating third-party transactions) now fall under Section 13(2) — the general rule — meaning Place of Supply is the location of the recipient (foreign client), qualifying the service as a zero-rated export. Indian intermediaries now gain export competitiveness.

Specific Overrides Under Section 13 Service TypePlace of SupplyServices related to immovable property outside IndiaLocation of the propertyIn-person services (e.g., medical, beauty)Location where services are performedServices relating to events outside IndiaLocation where events are heldServices on board conveyancesFirst scheduled point of departure

8. Special Category Rules at a Glance ScenarioPlace of SupplyInterior design for property in Goa (designer in Mumbai)Goa (Section 12(3))Wedding catering at venue in JaipurJaipur (Section 12(4))Conference held in BengaluruBengaluru (Section 12(5))Goods courier to unregistered buyer in PunePune — where goods handed over (Section 12(8))Fixed telephone line in ChennaiChennai — where line is installed (Section 12(11))Banking services to customer registered in DelhiDelhi — billing address on record (Section 12(12))Flight services Delhi → MumbaiDelhi — first point of departure (Section 12(10))SaaS to US client, paid in USDUnited States — qualifies as export (Section 13(2))

9. GST Place of Supply for Freelancers Freelancers providing services across state lines are among the most common sources of GST errors in India. Service types commonly affected:

Web development and design Content writing and copywriting SEO and digital marketing Graphic design and video editing Software development Business consulting

Freelancer Example 1 — Interstate

Freelancer Location: Telangana Client GSTIN: Registered in Delhi Place of Supply: Delhi (recipient's registered location, Section 12(2)) GST: IGST Invoice: Mention Place of Supply as Delhi; charge IGST

Freelancer Example 2 — Intrastate

Freelancer Location: Telangana Client: Individual in Hyderabad (unregistered) Place of Supply: Telangana (recipient's address on record) GST: CGST + SGST

Freelancer Example 3 — Export of Services

Freelancer Location: India Client: US-based startup (outside India) Payment received in USD (foreign currency) Place of Supply: United States (Section 13(2)) Classification: Zero-rated export of services GST: None charged; ITC refund may be claimed

Key compliance step for freelancers: Always collect the client's GSTIN and billing address before issuing any invoice. For unregistered clients, note their address and state for POS determination.

10. GST Place of Supply for SaaS Companies SaaS companies serve customers across multiple states and countries, making accurate POS determination business-critical. Domestic SaaS Customers (Section 12(2)) ScenarioPlace of SupplyGSTSaaS (Telangana) → Enterprise client in Karnataka (registered)KarnatakaIGSTSaaS (Telangana) → Client in Hyderabad (same state, registered)TelanganaCGST + SGSTSaaS (Telangana) → Individual subscriber in Mumbai (unregistered)Maharashtra (billing address)IGST International SaaS Customers (Section 13(2) / Section 14 — OIDAR) For SaaS products that qualify as OIDAR services (automated digital delivery without human intervention):

Supply to overseas registered businesses: Export of services → Zero-rated Supply to overseas consumers (B2C): Special rules under Section 14 may apply for foreign suppliers serving Indian consumers

Important distinction for SaaS founders: If your SaaS is delivered automatically (no human touch in delivery), it may qualify as OIDAR. The GST treatment differs when a foreign SaaS company serves Indian consumers — the foreign company may need to register under India's simplified GST registration for OIDAR providers.

Practical SaaS Invoicing Checklist Before generating a subscription invoice, confirm:

Is the customer GST-registered? (Collect GSTIN) What state is the customer's registered address? Is delivery automatic (OIDAR) or human-assisted? Is the customer in India or abroad? If abroad — is payment received in foreign currency?

11. GST Place of Supply for E-Commerce Sellers E-commerce creates a high volume of interstate transactions, making POS determination both frequent and important. General Rule for E-Commerce Goods Place of Supply = Location where goods are delivered (where movement terminates) ScenarioPlace of SupplyGSTSeller in Gujarat, delivery to buyer in KeralaKeralaIGSTSeller in Karnataka, delivery to buyer in BengaluruKarnatakaCGST + SGSTSeller in Maharashtra, delivery to buyer in PuneMaharashtraCGST + SGST E-Commerce Operator Liability Under Section 9(5) of the CGST Act, e-commerce operators (Flipkart, Amazon, etc.) are liable to collect and remit GST for certain service categories provided through their platform (restaurant services, passenger transport, housekeeping, etc.). For goods sold by third-party sellers, the POS rules above apply to the seller's own GST compliance. Dropshipping Businesses In dropshipping, three parties are involved:

Dropshipper (Retailer) — sells to end customer Supplier — ships directly to end customer on behalf of dropshipper End Customer — receives goods

This is a Bill-To Ship-To scenario (Section 10(1)(b)):

Supplier → Dropshipper: POS = Dropshipper's location Dropshipper → End Customer: POS = End Customer's location (delivery address)

Both invoices must be issued correctly with proper POS for the ITC chain to remain intact.

12. GST Calculation Examples Transaction Details

Transaction Value: ₹50,000 Applicable GST Rate: 18%

Example A: Interstate Supply

Supplier: Maharashtra Place of Supply: Karnataka

ComponentAmountTransaction value₹50,000IGST @ 18%₹9,000Invoice total₹59,000

Example B: Intrastate Supply

Supplier: Karnataka Place of Supply: Karnataka

ComponentAmountTransaction value₹50,000CGST @ 9%₹4,500SGST @ 9%₹4,500Total GST₹9,000Invoice total₹59,000

Note: Total GST amount is the same (₹9,000 at 18%) in both cases. The difference is only in which government receives it — the Centre alone in an interstate transaction (IGST), or Centre and State equally in an intrastate one (CGST + SGST).

Example C: Export of Services (Zero-Rated)

Indian Consultant in Telangana Foreign client in Singapore, paying in SGD

ComponentAmountTransaction value₹1,00,000GST₹0 (zero-rated export)Invoice total₹1,00,000 The consultant can file for a refund of GST paid on inputs used to deliver this service.

13. What Changed in 2026 Three key GST developments in 2025–2026 directly affect Place of Supply compliance:

14. Intermediary Services POS Amendment (Finance Act 2026 — effective March 30, 2026) The long-standing POS anomaly for intermediary services has been resolved. Indian agents and brokers facilitating transactions for foreign principals now have Place of Supply determined under Section 13(2) — the general rule (location of recipient). This reclassifies such services as exports, ending the competitive disadvantage.

15. ITC Utilisation Flexibility (February 2026) From February 2026, once IGST ITC is exhausted, taxpayers can use CGST and SGST credits to pay IGST liability in any sequence — CGST first, SGST first, or any combination. The GST portal no longer enforces a fixed order. This does not change POS rules but significantly affects cash flow management for businesses with interstate transactions.

16. 3-Year Hard Cut-Off for Late Returns A statutory 3-year window is now enforced for filing GST returns. Periods beyond this window are permanently locked on the GSTN portal. Businesses with unresolved POS-related filing discrepancies from earlier years must resolve them before they fall outside the permissible window.

17. Common Mistakes and How to Avoid Them Mistake 1: Using supplier state as Place of Supply Wrong thinking: "I'm in Maharashtra, so Maharashtra GST applies to all my invoices." Correct approach: Place of Supply is the recipient's location for services, and delivery location for goods. Your location is irrelevant to POS determination.

Mistake 2: Charging IGST on intrastate transactions A Bengaluru supplier selling to a Bengaluru customer charges IGST instead of CGST+SGST. This results in revenue going to the Centre instead of being split with Karnataka. The state government can raise a demand.

Mistake 3: Bill-To Ship-To errors A company orders goods for delivery to a branch in another state but issues the invoice with its head office location as the POS. This misclassifies an interstate transaction as intrastate.

Mistake 4: Treating domestic service delivery as the POS for professional services A freelancer in Delhi visits a client's office in Mumbai to deliver consulting. The meeting is in Mumbai, but the POS is still the recipient's registered location (not where the meeting happened), unless it falls under a specific override like Section 12(3) or 12(4).

Mistake 5: Not collecting GSTIN from B2B clients Without the client's GSTIN, the transaction is treated as B2C (unregistered), and POS defaults to the recipient's address on record — which may not be known. This creates ITC issues for the client. Solution: Make GSTIN collection a mandatory step in your onboarding or invoicing workflow.

Mistake 6: Treating export invoices incorrectly Indian freelancers and SaaS founders often charge 18% GST on foreign client invoices. Export of services is zero-rated — no GST is charged, and you are eligible for an ITC refund on inputs. Charging GST here is both legally incorrect and commercially uncompetitive.

15. Quick Reference: POS Rules Summary Table Transaction TypePrimary RuleKey SectionDomestic goods with movementDelivery destinationSection 10(1)(a)Goods without movementLocation of goods at deliverySection 10(1)(c)Bill-To Ship-To (goods)Principal buyer's location (1st supply), recipient's location (2nd supply)Section 10(1)(b)Goods installed/assembled at siteInstallation locationSection 10(1)(d)Imported goodsLocation of importerSection 11(1)Exported goodsDestination outside IndiaSection 11(2)Services — B2B domesticRecipient's registered locationSection 12(2)(a)Services — B2C domesticRecipient's address on recordSection 12(2)(b)Immovable property servicesLocation of propertySection 12(3)Restaurant / cateringWhere service is performedSection 12(4)Training / event servicesWhere event is heldSection 12(5)Goods transportation — registeredRecipient's locationSection 12(8)(a)Goods transportation — unregisteredWhere goods are handed overSection 12(8)(b)Telecom — fixed lineWhere terminal is installedSection 12(11)Banking / financial servicesRecipient's billing address on recordSection 12(12)On-board conveyance servicesFirst point of departureSection 12(10)Services — cross-border (general)Location of recipientSection 13(2)OIDAR services (foreign to India B2C)Location of service recipient (India)Section 14

16. Frequently Asked Questions What is Place of Supply under GST? Place of Supply is the legally determined location where a supply of goods or services is deemed to have occurred under the IGST Act, 2017. It determines which tax type applies — IGST for interstate, and CGST + SGST for intrastate — and which state receives the GST revenue. Why is Place of Supply important? It determines the correct tax type (IGST vs CGST+SGST), directly affects Input Tax Credit eligibility, controls which government receives the revenue, and defines how transactions are reported in GSTR-1 and GSTR-3B. An incorrect POS triggers demand notices, interest, and penalties. How is Place of Supply determined for goods? Under Section 10, the general rule is the location where goods are delivered (where movement terminates). Special rules apply for Bill-To Ship-To transactions (Section 10(1)(b)), goods assembled at site, and goods supplied without movement. How is Place of Supply determined for services? Under Section 12 (both parties in India), the general rule is the recipient's registered location for B2B, or the recipient's address on record for B2C. Specific overrides apply to immovable property, events, restaurants, telecom, banking, and transportation services. Does Place of Supply affect Input Tax Credit? Yes. If a supplier charges IGST on an intrastate transaction (or CGST+SGST on an interstate one), the recipient cannot offset that credit against their actual tax liability. This effectively wastes the ITC and increases the buyer's cost. Should a freelancer charge IGST or CGST+SGST? It depends on the client's state. If the client is registered in a different state, charge IGST. If the client is in the same state, charge CGST+SGST. For foreign clients paying in foreign currency, the service qualifies as a zero-rated export — no GST should be charged. What happens if the wrong GST is charged on an invoice? The invoice is technically incorrect. The recipient may be unable to claim ITC. A revised invoice must be issued. If returns have already been filed, an amendment is needed, and potential interest for the period of incorrect filing may apply. Can incorrect Place of Supply result in penalties? Yes. Under Section 122 of the CGST Act, charging wrong tax attracts a penalty of ₹10,000 or the tax amount involved — whichever is higher. Interest under Section 50 also applies on the unpaid correct tax for the period of error. What changed for intermediary services in 2026? The Finance Act, 2026 (effective March 30, 2026) resolved a long-standing anomaly. Intermediary services for foreign principals now fall under Section 13(2) — the general rule — classifying them as exports of services. Indian agents and brokers serving foreign clients are no longer required to charge IGST, making them competitive internationally. Does a SaaS subscription to an overseas client attract GST? No — provided the service qualifies as an export of services (recipient outside India, payment received in foreign currency, and no establishment of the recipient in India). The supply is zero-rated under Section 13(2). The SaaS provider can claim an ITC refund on input taxes paid.

Conclusion Place of Supply is the core mechanism through which India's destination-based GST system distributes tax revenue to the right state. Every GST-registered business — whether a solo freelancer, a growing SaaS startup, a manufacturer, or an e-commerce seller — must determine POS correctly before issuing every invoice. The consequences of getting it wrong go beyond a financial penalty. Wrong POS creates broken ITC chains that affect your clients, triggers scrutiny in GST returns reconciliation, and — for businesses with high invoice volumes — can result in cumulative liabilities that are expensive to unwind. The practical approach is simple:

Know your supplier state. Identify the correct Place of Supply using the section that applies to your transaction type. Compare both — same state means CGST+SGST, different state means IGST. Always collect GSTIN for B2B customers. Stay current with annual GST amendments.

Related Resources on VSNEXOS

GST Calculator — Instant IGST / CGST / SGST Calculator GST Invoice Generator — Free, Compliant Invoices in 60 Seconds Interstate vs Intrastate Supply — Detailed Breakdown Input Tax Credit (ITC) Guide — Conditions, Eligibility, Claims GSTR-1 Filing Guide — What to Report and How GST Registration Guide — Who Must Register in 2026

About the Author Vishnu Bandavath is the Founder & CEO of VSNEXOS, a technology firm based in Hyderabad, India. He writes about GST compliance, AI automation, SaaS development, and digital transformation. Through VSNEXOS tools and educational content, he helps Indian businesses simplify compliance and improve operational efficiency. Have a GST question specific to your business? Reach out to the VSNEXOS team.