In this guide 6 sections
Place of supply is the state where the law treats a supply as taking place. If that state matches the supplier’s registration state, the invoice carries CGST and SGST. If it differs, the invoice carries IGST. Billing address alone does not decide it. Your accountant confirms the rule for each kind of sale.
Two states decide the tax, not one address
Every invoice involves two states. The first is the location of the supplier, taken from the GSTIN under which you are billing. The second is the place of supply. Compare them. Same state means CGST plus SGST. Different states means IGST.
Many billing screens get this wrong because they compare the supplier with the customer’s billing address. That works for a retail counter. It fails the moment goods are shipped to a site, a warehouse or a branch that sits in a different state from the head office that pays the bill.
A wrong split is not a cosmetic error. The credit a buyer claims depends on which tax head appears on the invoice. A buyer who receives CGST and SGST when IGST was due will come back to you, usually at month-end.
Why a branch delivery is not taxed like a local sale
Take a distributor in Pune invoicing a buyer whose head office is in Pune but who wants stock delivered to a branch in Hyderabad. The bill-to party is local. The ship-to location is not. For goods, the place of supply generally follows where the movement ends, so the treatment can turn on the delivery state.
Some cases need more detail. A bill-to, ship-to arrangement, where the buyer directs goods to a third party, has its own provisions. Stock transfers between your own registrations are also supplies. Your CA should rule on each pattern once, in writing.
That ruling is the useful output. Software cannot invent it. What software can do is apply the same ruling every time, without relying on whoever is keying the invoice that day.
- Bill-to and ship-to in the same state
- Bill-to in your state, ship-to in another
- Goods sent to a buyer’s site on their instruction
- Transfers between your own registered branches
- Exports and supplies to a special economic zone
Goods, services and registration change the answer
Goods and services follow different rules. For services, the location of the recipient is often the starting point, and there are named exceptions for things like work on immovable property or event admission. A single customer can therefore trigger different tax heads on the same day.
Registration matters too. A buyer with a valid GSTIN is treated differently from an unregistered one. The state code in the first two digits of the GSTIN is a quick check that the customer record is at least self-consistent.
Nothing here is a reason to guess. It is a reason to keep a short table, owned by your accountant, that lists each type of sale you make and the treatment it receives.
How billing software applies the treatment at the moment of entry
Good billing software holds the supplier state, the ship-to state and a supply type on each document. It reads the table your CA approved and picks the tax head automatically. The person raising the invoice does not choose CGST, SGST or IGST by hand.
The same software refuses to save when the fields disagree. Consider a blank ship-to state. Consider a GSTIN whose state code contradicts the address. Take a manual tax override typed without a reason. Each should stop the save and say why in one line.
Changes to the table should be dated. When your accountant revises a ruling, old invoices keep the treatment they were issued under, and new ones follow the revision.
- Supplier state taken from the registration used
- Ship-to state required on every goods invoice
- Supply type chosen from a fixed list
- Overrides blocked or logged with a reason
- Rule changes recorded with an effective date
Run a sample check before you trust the split
Pull twenty recent invoices that crossed a state line in some way. Include branch deliveries, site deliveries, services and one stock transfer. Write down the tax head each carried, then ask your CA which head each should have carried.
Every mismatch points to a rule that was never written down. Add it to the table, load the table into the billing system and re-run the sample. Repeat until the two columns agree, then keep the sample as a regression test for future changes.
Place of supply decision table
A single sheet lists every type of sale you make, one per row. Columns are sale type, bill-to state, ship-to state, goods or service, tax head applied, the section or note your CA relied on, effective date and who approved it. A second block lists twenty sample invoices with the head charged and the head due, so mismatches are visible.
Open a blank worksheet to printQuestions owners ask
Is place of supply the same as the customer’s billing address?
No. For goods it usually follows where the movement ends, which can be a different state from the billing address. For services other rules apply. Treat the billing address as one input, not the answer.
Who decides the treatment for an unusual sale?
Your chartered accountant or tax adviser. Software applies a ruling consistently, but it does not interpret the law. Get the ruling in writing once, then load it as a rule.
What happens if CGST and SGST were charged when IGST was due?
The invoice needs correction through the route your adviser prescribes, usually a credit note and a fresh invoice. The buyer’s credit and your return both depend on the fix, so raise it early.