If your registered location and the place of supply are in the same state, charge CGST + SGST. If they are in different states, charge IGST. The total rate doesn't change. 18% IGST is the same as 9% CGST plus 9% SGST. What changes is which government gets the tax, and whether your customer can claim the credit.
Most of the work is finding the place of supply. It isn't always the customer's billing address. This guide covers the rules small businesses run into most often, with examples.
The rule in one line#
Compare two things:
- Your location as a supplier. This is the state on your GSTIN. The first two digits are the state code, for example 07 for Delhi, 27 for Maharashtra and 29 for Karnataka.
- The place of supply. For goods and services this is worked out differently (see below).
- Same state → intra-state supply → CGST + SGST. In Union Territories without their own legislature, such as Chandigarh or Ladakh, you charge UTGST instead of SGST.
- Different states → inter-state supply → IGST.
A few supplies count as inter-state even when both parties are in the same state. Supplies to an SEZ unit or developer are the common example. Exports work the same way. They are zero-rated, so you either pay IGST or supply under LUT.
Finding the place of supply for goods#
For most goods, the place of supply is where the goods are delivered, meaning where the movement ends.
- A Pune manufacturer sells ₹2,00,000 of steel brackets to a trader in Mumbai. Both are in Maharashtra, so you charge 9% CGST (₹18,000) + 9% SGST (₹18,000).
- The same manufacturer ships the same order to a trader in Ahmedabad. Maharashtra and Gujarat are different states, so you charge 18% IGST (₹36,000).
Bill-to, ship-to. Sometimes your buyer asks you to deliver straight to their customer. In that case the place of supply is the buyer's principal place of business, not the delivery address.
Example: A Surat textile trader (Gujarat) gets an order from a buyer in Indore (Madhya Pradesh). The buyer says "ship it to our customer in Nagpur." The place of supply is Madhya Pradesh, because the buyer is billed there. Gujarat and MP are different states, so the trader charges IGST. The Nagpur address goes on the invoice as the shipping address.
Finding the place of supply for services#
Most services follow the general rule:
- Customer has a GSTIN: the place of supply is the customer's registered location.
- Customer has no GSTIN: the place of supply is the customer's address if you have it on record. If you don't, it is your own location.
Examples for a Delhi-based design agency (GSTIN starts with 07):
- Client in Gurugram with a Haryana GSTIN, project fee ₹1,00,000. Delhi and Haryana are different states, so the agency charges IGST of ₹18,000.
- Client in South Delhi with a Delhi GSTIN. Both are in Delhi, so the agency charges CGST ₹9,000 + SGST ₹9,000.
- An individual in Chennai (no GSTIN) hires the agency for a wedding invite design, and the agency has the Chennai address. The place of supply is Tamil Nadu, so the agency charges IGST.
Watch for exceptions. Some services have their own rules. Services related to immovable property, such as interior work, architecture or hotel stays, are usually supplied where the property is. Events, training, restaurants and transport have specific rules too. Say a Mumbai interior designer fits out an office in Bengaluru. The place of supply is Karnataka, not Maharashtra. If your service is anything like this, ask your CA once and write the answer down.
Quick reference table#
| Your state | Customer / situation | Place of supply | Charge |
|---|---|---|---|
| Maharashtra | Goods delivered in Mumbai | Maharashtra | CGST + SGST |
| Maharashtra | Goods delivered in Ahmedabad | Gujarat | IGST |
| Gujarat | Bill to Indore, ship to Nagpur | Madhya Pradesh | IGST |
| Delhi | Service to registered client in Haryana | Haryana | IGST |
| Delhi | Service to registered client in Delhi | Delhi | CGST + SGST |
| Karnataka | Service to unregistered person, address unknown | Karnataka | CGST + SGST |
| Maharashtra | Interior work on a Bengaluru office | Karnataka | IGST |
| Any state | Supply to an SEZ unit | Treated as inter-state | IGST (or LUT, where allowed) |
Branches in other states and online sales#
Your own branches. Each GST registration in a different state is a separate taxable person. Say a Chennai company sends stock to its own Hyderabad branch, which is registered in Telangana. That is a supply between two registrations, so the company raises a tax invoice and charges IGST, even though no outside customer is involved. How to value these transfers has its own rules, so check this with your CA.
The same applies when you bill from a branch. A Bengaluru branch billing a Bengaluru client charges CGST + SGST, even if head office is in Delhi. What counts is the GSTIN on the invoice, not where the company is headquartered.
Online sales. For D2C brands and marketplace sellers, the place of supply for goods is usually the customer's delivery address.
- A Jaipur skincare brand ships a ₹1,200 order to Kolkata. Rajasthan and West Bengal are different states, so the brand charges IGST.
- The same brand ships to Jodhpur. Both are in Rajasthan, so it charges CGST + SGST.
This is why the tax split on your sales report changes from order to order. The rules for online sales, marketplaces and tax collected at source have changed over the years. Check the current position on the GST portal or with your CA before you set up your store's tax settings.
Charged the wrong one? Here's how to fix it#
It happens all the time. A Delhi agency bills a Haryana client ₹1,00,000 + CGST ₹9,000 + SGST ₹9,000. It should have charged IGST of ₹18,000. The total is the same, but the client's books show CGST and SGST owed to the wrong state. Their CA will ask for a corrected invoice before claiming the credit.
If you spot it before filing your returns for that period:
- Issue a credit note against the original invoice for the full amount.
- Issue a fresh invoice with the correct tax, which here is IGST ₹18,000.
- Report both in GSTR-1, so the client sees the right tax in their records.
If returns are already filed and the tax is paid: under GST law you can't simply move tax from one head to another. Generally, you pay the correct tax and then apply for a refund of the tax paid under the wrong head. There is relief from interest on the correct tax in this situation, and there are time limits for the refund. The exact process depends on your case, so work through it with your CA.
Either way, tell your client before you send the new documents. A two-line message saves a lot of confused emails.
A simple habit that prevents most mistakes#
Before you click "send" on any invoice, check three things:
- Your GSTIN state code (the branch you're billing from).
- The place of supply, worked out using the rules above, with the state name written on the invoice.
- The tax lines, which should be either CGST + SGST or IGST, never both on the same line.
Save the customer's GSTIN and state once when you add them, so you don't retype it on every invoice. Then the tax split follows from that saved state.
If you invoice in Clyrix, each invoice shows CGST, SGST and IGST separately. Credit notes sit next to the original invoice, and you can export GSTR-1 data for your CA at the end of the month. You can see how it works on the GST invoicing page.
For more practical GST guides, browse the Clyrix blog.
