IGST vs CGST + SGST: how Place of Supply decides your tax type

Almost every GST invoice that gets bounced back has the same root cause: the wrong tax heads. The supplier charged IGST when the transaction was intra-state, or split it into CGST and SGST when it was inter-state. The total tax amount is often identical, which is exactly why it slips past a manual review — and exactly why an automated one catches it.

The rule in one line

Compare the location of the supplier with the place of supply. Same state or union territory means an intra-state supply, so you charge CGST + SGST. Different ones mean an inter-state supply, so you charge IGST. That is Sections 7 and 8 of the IGST Act, 2017, and there is no third option — you never charge all three heads on the same line.

Place of supply for goods

Section 10 of the IGST Act governs goods. The cases that matter in practice:

• Goods that move. Place of supply is where the movement terminates for delivery to the recipient. Delivery address wins, not billing address.
• Goods that do not move. Place of supply is the location of the goods at the time of delivery.
• Bill-to / ship-to. Where A bills B but ships to C on B's instruction, the law deems B to have received the goods, so the place of supply is B's principal place of business — not the state the goods physically landed in. This one causes a lot of wrong-head invoices.
• Exports and supplies to an SEZ. Treated as inter-state, so IGST — or zero-rated without payment of tax if you supply under a LUT.

Place of supply for services

Section 12 covers services where both parties are in India. The default is simple: if the recipient is registered, the place of supply is the recipient's location. If the recipient is unregistered, it is the address on record, and failing that, the supplier's location.

The exceptions override the default, and they are where mistakes cluster:

• Immovable property — including hotel accommodation, architects and interior decorators: the location of the property, regardless of where either party is registered.
• Restaurant, catering, personal grooming, fitness, beauty: where the service is actually performed.
• Training and events: where the event is held, for a registered recipient it is their location.
• Passenger transport: where the passenger embarks.

Four worked examples

What it costs you when it is wrong

Two separate problems. First, your buyer loses input tax credit, because the credit sitting in their GSTR-2B is under the wrong head and cannot be used. Marketplaces and larger buyers reject on exactly this basis, and your payment sits on hold until you issue a corrected document.

Second, you have paid the wrong tax to the wrong government. Section 77 of the CGST Act and Section 19 of the IGST Act let you pay the correct tax and claim a refund of the tax paid wrongly, and interest is not charged on the shortfall in that situation. That is a genuine relief, but it still means a refund claim, a credit note, and weeks of working capital tied up over what was a one-field mistake.

Before you issue the invoice

• Read the state code from the first two digits of both GSTINs — do not trust the address block.
• Confirm the actual delivery state for goods, and check for a bill-to / ship-to split.
• Check whether your service falls under a Section 12 exception before applying the default.
• Confirm the invoice carries one head pair only: CGST + SGST, or IGST. Never a mix.
• Confirm the place of supply field is present on the invoice — it is mandatory for inter-state supplies.

You can run all of these at once with the invoice checker, and if a return has already gone in late, the GST penalty calculator will tell you what the delay is costing.