Place of Supply in GST: Meaning, Rules and Examples (2026 Guide)

Place of supply in GST determines where a transaction gets taxed—and that single determination decides whether you’re paying IGST or CGST + SGST. Get it wrong, and you’re staring at audit notices, blocked input tax credit, and penalties that eat into margins you don’t have.

This guide breaks down the 2026 rules (including the massive Budget 2026 intermediary overhaul), walks through real scenarios, and flags the ghost errors that trip up even experienced compliance teams.

What Is Place of Supply in GST?

Place of supply is the location GST law assigns to a transaction for tax purposes. It’s governed by Sections 10–13 of the IGST Act, and it answers one question: does this sale happen within a state or across states?

That answer controls everything downstream—tax type, rate, GST return filing, and refund eligibility.

Here’s the thing most “basics” articles skip: place of supply isn’t always intuitive. A consultant sitting in Mumbai serving a client in Delhi might assume it’s inter-state. But the actual PoS depends on whether that client is registered, what type of service it is, and—post-2026—whether the supplier qualifies as an intermediary under the revised rules.

Why Place of Supply Matters More in 2026

Place of supply decides whether a transaction is treated as inter-state or intra-state, which directly impacts the type of GST charged, your invoice format, and whether you can claim refunds on exports.

But there’s a 2026-specific reason this matters more now. The 56th GST Council recommendations triggered two seismic shifts:

1. Intermediary PoS overhaul — Budget 2026 omits IGST Sec 13(8)(b), killing the old supplier-location rule for intermediaries.
2. Post-sale discount flexibility — Sec 15(3)(b) now lets you exclude discounts via credit notes without a pre-supply agreement.

If you’re still operating on pre-2026 logic, your invoices are probably wrong. And GSTN’s automated PoS validation dashboards are catching these mismatches faster than manual audits ever did.

How Place of Supply Decides GST Type

The core mechanic is simple:

• Supplier and customer in the same state → CGST + SGST
• Supplier and customer in different states → IGST
• Supply to/from outside India → IGST (with zero-rated treatment for exports)

Where it gets messy is figuring out what counts as the customer’s location. For goods, it’s usually the delivery address. For services, it depends on registration status, service type, and half a dozen special rules I’ll cover below.

How to Determine Place of Supply in GST (Decision Flow)

Use this step-by-step decision tree to accurately determine the place of supply and the applicable tax for every transaction:

Place of Supply Rules for Goods (Section 10, IGST Act)

For goods, PoS generally follows the movement of the product:

• Normal Interstate Movement
  Scenario: Goods shipped from Gujarat to Maharashtra.
  Place of Supply: Maharashtra (delivery location) | Tax: IGST
• Ex-Works / No Movement
  Scenario: Goods picked up by buyer directly from seller’s warehouse in Karnataka.
  Place of Supply: Karnataka | Tax: CGST + SGST
• Installation Required
  Scenario: Goods installed at a client site in Tamil Nadu.
  Place of Supply: Tamil Nadu (installation location) | Tax: IGST (if supplier is elsewhere)
• Bill-To Ship-To
  Scenario: Goods delivered to a third party at the direction of the buyer.
  Place of Supply: Location of the third party receiving the goods | Tax: Depends on states involved

The invoice mandate that catches people: As of 2026, GSTN requires the PoS state code embedded directly in GSTR-1 line items. Omitting this triggers auto-reconciliation failures against GSTR-2A/2B—and roughly 30% of GST audit disputes trace back to exactly this kind of invoice sloppiness.

Tactile cue: When filing GSTR-1 on the portal, the PoS field now highlights in amber if the state code doesn’t match the recipient’s GSTIN prefix. If you see amber, stop—don’t override it. Verify the shipping address first.

Place of Supply Rules for Services (Sections 12 & 13)

Services are where practitioners lose sleep. The default recipient location rule under Sec 13(2) sounds straightforward until you hit edge cases.

Domestic Services (Sec 12)

• Registered recipient: PoS = location of the recipient (as per GSTIN).
• Unregistered recipient: PoS = recipient’s address on record; if unavailable, supplier’s location.

Special carve-outs you can’t ignore:

• Immovable property services → PoS = property location
• Restaurant/catering → PoS = where the service is performed
• Training and events → PoS = venue location (registered recipients); event location (unregistered)
• Transportation of goods → PoS = destination of goods

Cross-Border Services (Sec 13) — The 2026 Overhaul

This is the big one. Pre-2026, if you were an Indian intermediary (say, a sourcing agent connecting a foreign buyer with Indian manufacturers), your PoS was your location under Sec 13(8)(b). That meant you paid IGST on what was essentially an export—and couldn’t claim zero-rating.

Budget 2026 removes Sec 13(8)(b) entirely. Now, the general Sec 13(2) recipient location rule applies. If your client is outside India, your PoS is outside India. That makes the supply a zero-rated export, and you can file under LUT/Bond for refund eligibility under Section 54 CGST.

2026 Budget Changes: What Actually Shifted

Here is the exact Pre vs. Post-Amendment Comparison:

• Intermediary PoS
  Pre-2026: Supplier location (Sec 13(8)(b))
  Post-2026: Recipient location (Sec 13(2))
• Export eligibility for intermediaries
  Pre-2026: Blocked—taxed domestically
  Post-2026: Zero-rated via LUT/Bond
• Post-sale discounts
  Pre-2026: Required pre-supply agreement for exclusion
  Post-2026: Credit note under Sec 34 suffices; no prior contract needed
• ITC on discounts
  Pre-2026: Complex reversal chain
  Post-2026: Recipient reverses ITC per Sec 34; cleaner workflow
• Invoice PoS validation
  Pre-2026: Manual cross-check
  Post-2026: GSTN automated dashboard flags mismatches

Refund Claims via LUT: The Practical Steps

If you’re an intermediary supplier post-amendment:

1. File LUT on the GST portal before the start of the financial year (or before the first export invoice).
2. Issue export invoices with PoS as the foreign recipient’s country.
3. Claim refund of accumulated ITC under Section 54—or use it against domestic output liability.

Ghost error from forums: Some intermediaries filed LUT but forgot to update their HSN/SAC codes to reflect “export of services” in GSTR-1. The portal accepted the LUT but rejected the refund application because the return data didn’t match. The fix? Amend GSTR-1 before filing the refund—don’t assume the portal connects the dots.

Post-Sale Discounts and GST Credit Notes

Before 2026, if you gave a customer a volume discount after the original sale, you needed a pre-supply agreement linking the discount to the original invoice. No agreement? The discount couldn’t reduce your taxable value.

Post-2026, Sec 15(3)(b) allows exclusion of post-sale discounts through GST credit notes under Sec 34. The recipient reverses their ITC accordingly—no invoice linkage or prior contract required. This is a genuine workflow simplification for B2B businesses running trailing commission structures or retrospective rebate programs.

Common PoS Mistakes That Trigger Audits

1. Using billing address instead of shipping address for goods. The PoS for goods follows physical delivery, not where the invoice is addressed. Bill-to-ship-to scenarios trip this up constantly.
2. Ignoring registration status for services. An unregistered recipient changes the PoS default. If you’re treating all service recipients the same, your IGST/CGST split is probably wrong.
3. Intermediaries still using the old Sec 13(8)(b) logic. Post-Budget 2026, this section doesn’t exist. If your accounting software hasn’t been updated, every intermediary invoice is misstated.
4. Missing PoS state code on invoices. GSTN’s invoice reconciliation now auto-flags this. The field exists—use it. Omission is the single fastest path to a mismatch notice.

Real-World Examples

• Example 1: A SaaS company in Bangalore sells a subscription to a registered business in Hyderabad. PoS = Hyderabad (recipient GSTIN location). Tax = IGST.
• Example 2: A Delhi-based sourcing agent connects a US buyer with Indian textile manufacturers. Post-2026, PoS = US (recipient location under Sec 13(2)). Tax = zero-rated export via LUT. Before 2026, this same agent would’ve paid IGST with no refund path.
• Example 3: A caterer in Pune provides services at a wedding venue in Goa. PoS = Goa (where the service is performed). If the caterer is registered in Maharashtra, tax = IGST.
• Example 4: A manufacturer in Gujarat gives a 5% retrospective discount to a distributor in Rajasthan. Post-2026, the manufacturer issues a credit note under Sec 34. The distributor reverses ITC. No prior agreement needed.

FAQs

How has Budget 2026 changed intermediary place of supply?
Budget 2026 omits IGST Sec 13(8)(b). Intermediary services to foreign clients now follow the Sec 13(2) recipient location rule, qualifying as zero-rated exports via LUT/Bond.

Can I reduce GST on post-sale discounts without a prior agreement?
Yes. Post-2026, issue a credit note under Sec 34. The recipient reverses ITC. No pre-supply contract or invoice linkage is required under revised Sec 15(3)(b).

What happens if I charge the wrong GST type due to incorrect PoS?
You’ll face ITC mismatch during reconciliation, potential demand notices, and interest liability. The fix involves issuing corrected invoices and filing amended returns before the annual return deadline.

How do I claim refunds as an intermediary exporter post-2026?
File LUT on the GST portal, issue export invoices with foreign PoS, and apply for ITC refund under Section 54 CGST. Ensure GSTR-1 reflects the correct SAC codes for export of services.

What PoS details must every GST invoice include?
Supplier GSTIN, PoS state code, recipient GSTIN (if registered), and tax type (IGST or CGST+SGST). Missing any of these triggers GSTN auto-reconciliation flags.

Does PoS change for e-commerce or digital services?
For OIDAR (online information and database access or retrieval) services, PoS is the recipient’s location—regardless of where the supplier’s server sits.

How do SEZ supplies factor into PoS?
Supplies to SEZs are treated as inter-state (IGST applies) and qualify for zero-rating, similar to exports.

Conclusion: Master Your PoS to Protect Your Margins

Running multi-state operations means every invoice carries a Place of Supply decision—and every wrong decision compounds during filing season. With the strict 2026 automated portal validations and the new intermediary rules, getting PoS right the first time is essential to avoiding blocked ITC and stressful compliance notices. Memorize the decision flow, update your invoicing software, and ensure your team understands the difference between a billing address and a true Place of Supply.