Is this sale of goods interstate or intrastate GST?

Your company is registered in Hyderabad. A customer in Bengaluru orders goods. He wants them delivered to his factory in Chennai. Another customer has a Pune head office but takes delivery at your Hyderabad warehouse. A third is a walk-in buyer who gives no GSTIN.

Which tax goes on each invoice: CGST plus SGST, or IGST? The answer depends on one question. Is the supply interstate or intrastate? The Integrated Goods and Services Tax Act, 2017 (IGST Act) answers it with two things: the location of the supplier and the place of supply. This article is about goods only. It does not cover the rate split itself or services.

The test in plain words

A supply of goods is interstate when the location of the supplier and the place of supply are in two different States, two different Union territories, or a State and a Union territory (s.7(1), IGST Act 2017). It is intrastate when both are in the same State or Union territory (s.8(1), IGST Act 2017). Both sections are "subject to the provisions of section 10". So the real work is finding the place of supply.

Sections 7 and 8 give you the test. Section 10 tells you where the place of supply is.

Step 1: Fix your own location

The IGST Act defines "location of the supplier of services" (s.2(15), IGST Act 2017). It is the registered place of business the supply is made from, or a fixed establishment elsewhere, and so on. The Act gives no separate definition for goods. For goods, the practical reading (not a statutory definition) is the registration (place of business) from which you make and invoice the supply. Have a CA confirm this if you run several registrations or an unusual dispatch arrangement.

One related rule matters if you have branches. Where a person has an establishment in a State and another establishment outside that State, those establishments are treated as establishments of distinct persons (Explanation 1 to s.8, IGST Act 2017). A branch in another State is also an establishment there (Explanation 2 to s.8). Separately, a person with registrations in more than one State is treated as distinct persons for each registration (s.25(4)-(5), CGST Act 2017), and supply of goods between distinct persons in the course of business is a supply even without consideration (Schedule I, para 2, CGST Act 2017). So stock sent from your Hyderabad registration to your Chennai registration is a supply between distinct persons, in different States, and is interstate.

Step 2: Find the place of supply, case by case

Section 10(1) of the IGST Act 2017 lists the cases. Clause (ca), covered in Step 4, overrides clauses (a) and (c) for buyers who are not registered. Section 10 applies to goods other than imports and exports; those are in Step 5.

Goods that move (s.10(1)(a)). Where the supply involves movement of goods, "whether by the supplier or the recipient or by any other person", the place of supply is the location of the goods at the time the movement terminates for delivery to the recipient.

So the test is where the goods end up, not where the buyer's office or GSTIN sits. Goods leave Hyderabad and are delivered in Pune: the place of supply is Maharashtra. Your location is Telangana. That is interstate.

Goods that do not move (s.10(1)(c)). Where the supply does not involve movement of goods, the place of supply is the location of the goods at the time of delivery to the recipient. Goods sold ex-warehouse where they already lie stay in that State.

Goods installed or assembled at site (s.10(1)(d)). The place of supply is the place of installation or assembly. A machine made in Hyderabad and installed in a plant in Odisha has Odisha as the place of supply.

Goods supplied on board a conveyance (s.10(1)(e)). On a vessel, aircraft, train or motor vehicle, the place of supply is where the goods are taken on board.

If the place cannot be determined (s.10(2)). It is fixed "in such manner as may be prescribed". Do not guess in this case. Check the current rule on the GST portal or with your CA.

Step 3: The bill-to-ship-to case

This is where most errors occur. Buyer A in Bengaluru places the order. He tells you to deliver to C in Chennai.

Section 10(1)(b) of the IGST Act 2017 covers it. Where goods are delivered by the supplier to a recipient or any other person "on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise", the third person is deemed to have received the goods. The place of supply is the principal place of business of that third person.

Applied to the example:

Your invoice to A goes by A's principal place of business, not by the Chennai delivery address. This applies where A directs the delivery, "before or during movement". Check that the facts really match: a direction from A, delivery to someone else, and A as your actual customer. If A is only a payer and not a person directing the goods, a CA should review the case before you choose the tax head.

Rule 46 of the Central Goods and Services Tax Rules, 2017 (CGST Rules) asks for the address of delivery on the tax invoice where it differs from the place of supply (rule 46(o), CGST Rules 2017). Show the delivery address where it differs from the place of supply.

Step 4: Unregistered buyers (the 2023 change)

Section 10(1)(ca) of the IGST Act 2017 was inserted by the Integrated Goods and Services Tax (Amendment) Act, 2023 with effect from 1 October 2023. Where goods go to a person who is not a registered person, the place of supply is, "notwithstanding anything contrary contained in clause (a) or clause (c)", the location as per the address of that person recorded in the invoice. If no address is recorded, it is your own location. The Explanation says recording the name of the State in the invoice is treated as recording the address.

For an unregistered customer this has two effects.

• The invoice entry decides the State. Record the buyer's address, or at least the State.
• If you leave it blank, the place of supply is your own location, and the sale becomes intrastate.

Do not leave it blank to save a field. It also affects how the tax is split.

Step 5: Special cases

• Imports. The place of supply of imported goods is the location of the importer (s.11(a), IGST Act 2017). Until the goods cross the customs frontiers of India, their supply is treated as interstate (s.7(2), IGST Act 2017). IGST on imported goods is levied under section 3 of the Customs Tariff Act, 1975 (proviso to s.5(1), IGST Act 2017).
• Exports. The place of supply is the location outside India (s.11(b), IGST Act 2017). A supply by a supplier located in India with a place of supply outside India is interstate (s.7(5)(a), IGST Act 2017).
• SEZ. A supply of goods to or by a Special Economic Zone (SEZ) developer or SEZ unit is interstate (s.7(5)(b), IGST Act 2017). It is not treated as intrastate even if the SEZ is in your own State (proviso to s.8(1), clause (i), IGST Act 2017). Supplies of goods "for authorised operations" to an SEZ developer or unit are zero rated (s.16(1)(b), IGST Act 2017).
• Tourists. Supplies made to a tourist referred to in section 15 are not treated as intrastate (proviso to s.8(1), clause (iii), IGST Act 2017). Integrated tax paid by a tourist leaving India on goods taken out of India is refunded in the prescribed manner (s.15, IGST Act 2017).
• Territorial waters. A location or place of supply in the territorial waters is deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located (s.9, IGST Act 2017).

Where the clock matters

There is no filing date inside this question. The risk sits on the invoice. You decide the tax head when you issue the invoice, and that is where the place of supply must be recorded. Every tax invoice must show the place of supply along with the name of the State in an interstate supply (rule 46(n), CGST Rules 2017). If your records later show you picked the wrong head, check the current correction procedure and time limits on the GST portal before you act. I have not set out those limits here because they were not part of the text I checked.

What not to do

• Do not decide by the buyer's GSTIN state alone. Delivery location decides under s.10(1)(a), subject to s.10(1)(b) and, for unregistered buyers, (ca).
• Do not treat a bill-to-ship-to sale as one simple supply. It is two supplies with two places of supply.
• Do not treat a branch transfer across States as a non-event.
• Do not leave the State blank on invoices to unregistered buyers.
• Do not charge CGST and SGST on an SEZ supply because the SEZ is in your State.

What to do now

If you get this wrong, you charge the wrong tax head. IGST is levied on interstate supplies (s.5(1), IGST Act 2017).

Have a CA review your facts before you act or file.

FAQs

My customer's GSTIN is from Karnataka but I deliver to his Hyderabad site. Which State?
Telangana, where the goods end up (s.10(1)(a), IGST Act 2017). Your location is also Telangana, so it is intrastate. The customer's own GSTIN State does not decide it. If a third person directs the delivery, s.10(1)(b) applies instead and that person's principal place of business decides.

Does it matter who arranges the transport?
No, for s.10(1)(a), which applies whether the movement is by the supplier, the recipient or any other person.

A walk-in unregistered buyer pays cash and takes goods away. Which State?
Under s.10(1)(ca), the address recorded in the invoice, or your location if none is recorded (IGST Act 2017). Record the State.

Do goods sold to an SEZ unit in my own State attract CGST and SGST?
No. That supply is not treated as intrastate (first proviso to s.8(1), IGST Act 2017). It is interstate (s.7(5)(b)).

Are my own branches in other States the same person?
No. Under Explanation 1 to s.8 of the IGST Act 2017, establishments in different States are treated as establishments of distinct persons.

Where is the rate split between CGST, SGST and IGST explained?
That is a separate question from deciding interstate or intrastate. This article stops at deciding the nature of the supply.

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See Also

• We forgot an invoice in GSTR-1 and our buyer cannot see it. What now?
• What is the last date to claim ITC on my purchase invoices for the year?
• Where do I report reverse charge (RCM) in GSTR-3B?