Place of Supply (POS) is one of the most critical and most litigated concepts under GST. It determines whether CGST+SGST or IGST applies, impacts tax rate, compliance jurisdiction, and credit eligibility, and is a frequent cause of notices, demands, and disputes.
Understanding POS clearly at the transaction stage prevents long-term tax exposure.
1. Introduction
Under GST, tax is levied based on:
location of supplier, and
place of supply.
The combination of these two determines:
intra-state supply (CGST + SGST), or
inter-state supply (IGST).
Incorrect determination of place of supply leads to wrong tax payment, which is not always easily correctable.
In GST, correct tax starts with correct place of supply.
2. Why Place of Supply Is Crucial
Place of supply impacts:
type of GST to be charged,
jurisdiction of tax authorities,
eligibility of input tax credit, and
refund or reversal implications.
Even if tax is paid, wrong head of tax can result in demand, interest, and penalty.
3. Place of Supply for Goods — Basic Rule
For goods involving movement:
place of supply is the location where movement of goods terminates for delivery.
For goods without movement:
place of supply is the location of goods at the time of delivery.
For goods assembled or installed:
place of supply is the place of installation or assembly.
4. Place of Supply for Goods — Special Situations
Special rules apply for:
goods supplied on board conveyances,
goods supplied through bill-to ship-to model, and
import and export of goods.
Imports are always treated as inter-state supplies and attract IGST.
5. Place of Supply for Services — Basic Rule
The general rule for services:
place of supply is the location of the recipient.
If recipient location is not available:
place of supply becomes the location of the supplier.
This rule applies unless overridden by specific service-based provisions.
6. Place of Supply for Services — Special Categories
Specific rules apply for services such as:
immovable property-related services,
restaurant and catering services,
transportation of goods or passengers,
event-based services, and
online information and database access services (OIDAR).
Each category has independent POS rules.
7. Immoveable Property Related Services
For services related to immovable property:
place of supply is the location of the property.
This applies regardless of:
where supplier is located, or
where recipient is registered.
8. Inter-State vs Intra-State Determination
Once place of supply is determined:
if supplier location and POS are in the same state → CGST + SGST
if they are in different states → IGST
This classification must be correct invoice-wise.
9. Common Errors in Place of Supply
Frequently observed mistakes include:
applying goods rules to services,
ignoring special service provisions,
incorrect POS for branch transfers, and
wrong treatment of bill-to ship-to transactions.
These errors often surface during audit or scrutiny.
10. Impact on Input Tax Credit
Wrong POS determination may result in:
ineligible ITC,
blocked credit, or
credit reversal with interest.
Even genuine mistakes have financial consequences.
Wrong place of supply converts valid tax into cost.
11. Litigation Perspective
GST litigation on POS typically arises due to:
overlapping interpretations,
absence of clear documentation, and
mixed supply or composite supply disputes.
Courts emphasize substance over form, but documentation plays a decisive role.
12. Practical Guidance for Businesses
To manage POS correctly:
determine POS before invoicing,
map POS logic in ERP/accounting software,
document rationale for complex transactions, and
review POS during GST audits.
Preventive analysis reduces future disputes.
13. Practical Guidance for GST Practitioners
Practitioners should:
apply transaction-specific POS rules,
avoid one-size-fits-all approach,
train billing teams on POS basics, and
document interpretations for high-value transactions.
POS errors are avoidable with upfront clarity.
14. CABTA Insight
“In GST, tax type follows place of supply, not convenience.”