Two sellers can raise what looks like an identical invoice - same product, same value - and still owe different taxes, because GST is not just about the rate you charge, it's about where the supply is deemed to take place. Getting the place of supply wrong is one of the most common reasons businesses end up charging CGST and SGST when they should have charged IGST, or vice versa - an error that GSTR-1 filers and marketplace sellers run into constantly.
This guide walks through how place of supply is generally determined for goods and services, with a particular focus on scenarios relevant to online sellers.
Why place of supply matters
Place of supply determines whether a transaction is treated as intra-state (attracting CGST plus SGST) or inter-state (attracting IGST). It is not simply where the seller is located - it depends on specific rules that look at where goods move to, or where the recipient is located for services. Getting this wrong doesn't just mean charging the wrong tax type on one invoice; it also affects how the transaction is classified in your GSTR-1 and GSTR-3B filings, and can trigger reconciliation flags.
Place of supply for goods - the general rule
For most goods transactions where the supply involves movement, the place of supply is generally the location where the movement of goods terminates for delivery to the recipient - in plain terms, the delivery address, not the seller's dispatch location. Where there is no movement involved (for example, goods simply handed over at the supplier's premises), the place of supply is generally the location of the goods at the time of delivery.
The bill-to, ship-to scenario
A frequent complication: an order is billed to one party (say, a head office) but shipped to a different address (say, a branch or a third party) in another state. Specific bill-to, ship-to rules exist to handle this - broadly, the place of supply can follow the ship-to party for the first leg of the transaction, which affects how the invoice should be raised. If your business regularly deals with this pattern, it's worth confirming the exact treatment with a tax professional, since getting it wrong on high-value B2B invoices is expensive to unwind later.
Selling through marketplaces - the practical case
If you dispatch inventory from a warehouse in one state to a buyer in another state through Amazon, Flipkart, Meesho, or a similar platform, the transaction is typically an inter-state supply, attracting IGST - even though from the buyer's perspective it might just look like an online order. Sellers who ship from multiple fulfilment centres across states need to be especially careful that the dispatch location, not just their registered address, is reflected correctly, since this feeds directly into e-commerce GST reconciliation and your TCS on e-commerce workings.
Place of supply for services - the general rule
For most services, the default rule is that the place of supply is the location of the recipient, if the recipient is registered; if the recipient is not registered, it typically falls back to the recipient's address on record, or the supplier's location where that address is not available. A number of specific services deviate from this default - services connected to immovable property are typically linked to where the property is located, and certain event or performance-based services are linked to where the event takes place. These specific-rule services are worth checking individually rather than assuming the default recipient-location rule applies.
Common place of supply scenarios
| Scenario | Likely place of supply | Likely tax type |
|---|---|---|
| Seller and buyer both in the same state | Buyer's location (same state as supplier) | CGST + SGST |
| Seller in one state, buyer in another | Buyer's state | IGST |
| Bill-to in one state, ship-to in another (B2B) | Generally follows the ship-to party per bill-to-ship-to rule | Usually IGST |
| Export of goods outside India | Outside India (zero-rated supply) | IGST, typically with refund or LUT-based treatment |
| Service to a registered recipient in another state | Recipient's registered location | IGST |
Treat this table as a starting point for how to think about a transaction, not a substitute for checking the specific rule that applies to your scenario, particularly for exports, SEZ supplies, and services with location-specific rules.
Special cases worth flagging
- SEZ supplies are generally treated as zero-rated, similar in spirit to exports, subject to conditions
- Exports of goods and services are treated as zero-rated supplies, with their own compliance path (LUT or refund route)
- Imports are generally treated as inter-state supplies for GST purposes
How place of supply affects your GSTR-1
The classification of a transaction as intra-state or inter-state, along with whether it is B2B or B2C, drives how it is reported in GSTR-1 - see our guide on GSTR-1 B2B vs B2C classification for how these categories interact. If dispatch-state data isn't captured consistently at the order level, it tends to surface later as a reconciliation problem rather than getting caught upfront - one more reason sellers moving high order volumes lean on GSTR-1 automation to apply place-of-supply logic consistently across every order rather than relying on manual checks.
Place of supply versus location of supplier - a distinction worth keeping straight
It helps to keep two questions separate: where is the supplier located (which determines the state code on your GSTIN and, for services, the default fallback), and where is the place of supply (which determines the actual tax type on that specific transaction). A single GSTIN can generate both intra-state and inter-state invoices in the same day depending on where each individual buyer or delivery address sits - the supplier's location doesn't change, but the place of supply changes transaction by transaction. Building this into how your team or software tags every order, rather than defaulting to the same treatment as the last invoice, is what keeps a high-volume seller's tax type accurate at scale.
Common mistakes
- Charging CGST + SGST on what is actually an inter-state marketplace sale
- Ignoring the ship-to state on bill-to-ship-to B2B orders
- Treating an export shipment like a normal domestic sale in the books
- Using the seller's registered address instead of the dispatch warehouse location when multiple fulfilment centres are involved
Frequently asked questions
What determines the place of supply for goods sold online?
Generally, the location where the goods are delivered to the buyer, which is typically an inter-state supply if the dispatch state and delivery state differ.
What is the place of supply for services provided to a registered business customer?
Typically the location of the registered recipient, which is why B2B services across states usually attract IGST.
How does a bill-to-ship-to arrangement affect place of supply?
Specific rules apply when the billed party and the shipped-to party are different, generally linking the place of supply to the ship-to party for that leg of the transaction. Confirm the exact treatment for your scenario with a tax professional.
What is the place of supply for exports?
Exports of goods and services are generally treated as supplies made outside India and are zero-rated, subject to the conditions and procedures set out for exports.
What happens if I charge the wrong tax type - CGST/SGST instead of IGST, or vice versa?
It typically requires a correction, which can involve issuing a credit note and a fresh invoice with the correct tax type, and may affect how the transaction reconciles in your returns. It's best to correct this as soon as it's identified rather than carrying it forward.
Why place of supply decides your GSTR-1 output
Place of supply is the field that determines whether a transaction carries IGST or CGST plus SGST, and it is one of the most common causes of an amended return. Marketplace sellers feel it hardest: a single monthly report can span every state, and the state code travels with each order rather than with the seller.
OneBooks GST is a GST and accounting platform that imports marketplace sales from Amazon, Flipkart, Meesho, Myntra, AJIO and JioMart alongside Excel and CSV files, then validates the imported rows before GSTR-1 is produced — surfacing missing GSTINs, invalid state codes and tax-rate mismatches while they are still cheap to fix. The reviewed output can be exported as GSTR-1 JSON for the portal, or as Tally XML, Miracle, Profit NX, Excel or CSV for the books. Because OneBooks GST keeps each GSTIN in its own organisation context, a seller registered in several states can check state-wise treatment one registration at a time.
How OneBooks GST handles it
OneBooks GST is a GST and accounting platform for Indian businesses. It imports sales data, prepares GSTR-1, parses bank statements, and exports to Tally XML, Miracle, Profit NX, Excel and CSV.
Validation warnings surface in OneBooks GST before an export is generated, which is cheaper than correcting the same error after filing.
