Every GST invoice has to answer one question before any tax is worked out: is this sale within my state, or to another state? The answer decides whether you charge CGST and SGST together, or IGST alone. Get it wrong and the tax has been paid under the wrong head — which is fixed not by adjusting, but by paying again correctly and claiming a refund of the wrong payment.
The rule in one line
| Your location and the place of supply are… | You charge |
|---|---|
| In the same state | CGST + SGST (half the rate each) |
| In the same union territory without its own legislature (for example Chandigarh or Ladakh) | CGST + UTGST |
| In different states or union territories | IGST (the full rate) |
| A supply to an SEZ unit or developer, or an export | Treated as inter-state: IGST (or zero-rated under LUT) |
So for an item taxed at 18%, a sale within your state shows CGST 9% + SGST 9%; a sale to another state shows IGST 18%. The customer pays the same total either way — what changes is which government receives it.
What "place of supply" means
The place of supply is not always your customer’s billing address. GST law (the IGST Act) sets out where a supply is treated as made. For most small businesses, a few rules cover nearly every invoice.
Goods
- Goods are delivered (moved): the place where the movement ends — where the goods are delivered.
- Bill to one party, ship to another, on the first party’s instructions: the place of business of the party who placed the order (the "bill-to"), not the delivery address.
- No movement (the buyer collects from you, or the goods are already with them): where the goods are when they are handed over.
- Goods installed or assembled at a site: the site where they are installed.
Services
- Customer is registered: the customer’s location (as per their GST registration).
- Customer is unregistered: their address on your records, if you have one; otherwise your own location.
- Services tied to a building or land (repairs, architects, hotel stays): where the property is.
- Services performed on the person or on the spot (restaurants and catering, salons and beauty treatment, fitness, health services): where they are actually performed.
Everyday examples
| Situation | Place of supply | Tax |
|---|---|---|
| Pune shop sells to a Mumbai retailer; goods sent to Mumbai | Maharashtra | CGST + SGST |
| Pune shop sells to a Surat buyer; goods sent to Surat | Gujarat | IGST |
| Indore trader bills a Delhi company, ships to its Bhopal branch on its instructions | Delhi (the bill-to party) | IGST |
| Jaipur buyer collects goods from your Jaipur godown | Rajasthan | CGST + SGST |
| Bengaluru designer bills a registered client in Chennai | Tamil Nadu | IGST |
| Kochi plumber repairs a flat in Kochi | Kerala (the property) | CGST + SGST |
How to get it right every time
- Save each customer’s state correctly — for registered customers, the first two digits of their GSTIN are the state code (27 is Maharashtra, 24 is Gujarat, and so on).
- Record the delivery address when it differs from the billing address, and decide which rule applies.
- Show the place of supply on the invoice for every inter-state sale, as Rule 46 requires.
- Let your software pick the tax type from the place of supply, rather than choosing it by hand on each bill.
What if you charged the wrong tax?
If you charged IGST on what was really an intra-state sale (or the other way round), the law does not let you move the amount across. You pay the correct tax, and the tax paid under the wrong head can be claimed as a refund. The simplest fix is to catch it before the return is filed: issue a credit note against the wrong invoice and a fresh invoice with the right tax.
