CGST, SGST & IGST: How Place of Supply Decides Your GST

India runs GST as a dual tax: both the Centre and the States have the right to tax a supply. To make that work across a single national market, GST uses three components — CGST, SGST and IGST — and a rule for deciding which ones apply to any given sale. That rule is the place of supply, and it is the first switch a finance team sets when raising an invoice.

Get it right, and the tax flows correctly, the buyer claims input tax credit without dispute, and the revenue settles between states silently in the background. Get it wrong, and you face a demand for the correct tax, interest from the original invoice date, and a buyer who cannot claim ITC because the state code does not match. This guide explains the three heads and the place-of-supply rule that governs them, in plain language.

The three tax heads

The key thing to understand is that these are not extra taxes stacked on top of each other — they are the same total GST, divided differently depending on whether the sale crosses a state border. An 18% intra-state supply is 9% CGST + 9% SGST. The same 18% supply inter-state is simply 18% IGST. The customer pays 18% either way; only the split changes.

• →CGST (Central GST): the Centre’s share, charged on intra-state supplies.
• →SGST (State GST): the State’s share, charged alongside CGST on intra-state supplies. In Union Territories, UTGST takes its place.
• →IGST (Integrated GST): a single combined tax charged on inter-state supplies, later split and settled between the Centre and the destination state.

Place of supply: the deciding switch

Place of supply is the deemed location where a supply is treated as happening for tax purposes. It decides the classification: if the location of the supplier and the place of supply are in the same state, the supply is intra-state and attracts CGST + SGST. If they are in different states or union territories, the supply is inter-state and attracts IGST.

Crucially, "place of supply" is not the same as "location of the supplier" — they are separate legal concepts, and confusing them is a common source of error. The rules are set out in Sections 10 to 13 of the IGST Act, 2017, with different logic for goods and services.

A tale of two invoices

The clearest way to feel the difference is to price the same sale two ways. A Mumbai electronics wholesaler sells goods worth ₹1,00,000 at 18% GST.

Sold to a shop in Pune (same state, Maharashtra): this is intra-state. The wholesaler charges ₹9,000 CGST + ₹9,000 SGST = ₹18,000, and the invoice total is ₹1,18,000. The ₹9,000 CGST goes to the Centre; the ₹9,000 SGST goes to Maharashtra.

Sold to a shop in Surat (different state, Gujarat): this is inter-state. The wholesaler charges ₹18,000 IGST, and the invoice total is still ₹1,18,000 — the customer pays the same. But now the tax is collected as IGST by the Centre and later settled so that Gujarat, the consuming state, gets its share. Same product, same price to the buyer; only the tax heads and the revenue routing change.

UTGST: the fourth tax most guides skip

There is a fourth component that often gets left out. In the Union Territories without their own legislature — such as Chandigarh, Lakshadweep, and the Andaman and Nicobar Islands — the state-level share is called UTGST (Union Territory GST) instead of SGST. So an intra-UT supply there is CGST + UTGST rather than CGST + SGST. Functionally it behaves the same way; it is just the correct label for supplies within those territories. Union Territories with a legislature (like Delhi and Puducherry) use SGST.

How the credits set off against each other

The three heads are not just about charging tax — they also govern how you use input tax credit, and the rules are strict. IGST credit is used first against IGST liability, and any balance can then be applied to CGST and SGST (in that order). CGST credit can be used against CGST and then IGST — but never against SGST. SGST credit can be used against SGST and then IGST — but never against CGST.

That CGST-SGST wall is the one businesses most often break in a manual calculation. Use SGST credit to pay a CGST liability and you end up with a short payment on one head and an unusable surplus on the other — which surfaces as interest and a mismatch. Getting the tax heads right on the invoice is what keeps the credit usable later.

Place of supply for goods

For goods that move, the rule is straightforward: the place of supply is where the movement of the goods terminates for delivery to the recipient (Section 10 of the IGST Act). So if goods are shipped from your warehouse in Maharashtra to a customer in Karnataka, the place of supply is Karnataka — an inter-state supply, so you charge IGST.

Two situations that catch people out: "bill-to ship-to" transactions, where the party billed and the party the goods are shipped to are in different states, have their own rule for fixing the place of supply; and stock transfers between your own branches in different states are treated as supplies too. Both are worth handling carefully, because they are frequent sources of misclassification.

Place of supply for services

Services follow Sections 12 and 13. The default rule for a supply of services to a registered recipient (B2B) is the location of that recipient. For an unregistered recipient (B2C), it is generally the address on record, and where none exists, the location of the supplier.

But services have many special cases. Immovable-property services (like construction or hotel accommodation) use the location of the property. Restaurant and catering services use the location of performance. Transportation, training, events and online services each have their own rules. Cross-border services follow Section 13, with its own logic — and note that the 2026 Budget changed the treatment of certain intermediary services, so cross-border service businesses should confirm the current position. For most domestic B2B services, though, the simple rule holds: the place of supply is where your registered customer is.

Exports, imports and SEZ

Exports and imports are treated as inter-state supplies, so IGST is the relevant head. Exports are zero-rated — you can export under a Letter of Undertaking without paying IGST, or pay IGST and claim a refund. Imports attract IGST (in addition to customs duties). Supplies to a Special Economic Zone (SEZ) unit are also treated as inter-state and zero-rated, regardless of whether the SEZ is in the same state as the supplier — a point that surprises many first-time exporters.

Why getting it wrong hurts

Misclassifying a supply is not a harmless clerical slip. Charge CGST + SGST where IGST was due (or the reverse) and you create a return mismatch: your GSTR-1 will not reconcile, and your buyer’s GSTR-2B will carry a different state code, blocking their ITC. Fixing it means credit notes, fresh invoices, and often interest under Section 50 calculated from the original invoice date. For a business running many invoices across states, a systematic classification error can block a meaningful amount of working capital.

E-commerce and multi-state sellers

If you sell across India through your own website or a marketplace, place of supply is a daily reality, not an occasional edge case. Every order can be intra-state or inter-state depending on where the customer is, so the tax heads change order by order. Sellers who default to one treatment — always charging CGST+SGST, say — build up systematic errors that block buyer ITC and fail reconciliation at scale.

The same applies to businesses with branches or warehouses in several states. The GSTIN you invoice from determines the supplier’s location, so shipping the same goods from a Maharashtra warehouse versus a Karnataka warehouse can change an intra-state supply into an inter-state one. Aligning your invoicing GSTIN with the actual dispatch location is essential.

Frequently asked questions

Is the total tax different for intra-state vs inter-state? No. An 18% supply is 18% either way — 9%+9% as CGST+SGST intra-state, or 18% IGST inter-state. The customer pays the same; only the split and the revenue routing differ.

Which state gets the SGST/IGST share? The consuming (destination) state. GST is a destination-based tax, so the tax ultimately accrues to where the goods or services are consumed.

Are exports taxed? Exports are zero-rated inter-state supplies — either exported under a Letter of Undertaking without paying IGST, or with IGST paid and refunded. SEZ supplies are treated the same way.

What decides place of supply for a service? The default for a registered (B2B) recipient is the recipient’s location; for B2C it is generally the supplier’s location, with many exceptions (immovable property, restaurants, transport, online services).

How Deskloc Flow gets it right automatically

Deskloc Flow determines the place of supply from your customer’s state and applies the correct tax heads on every invoice — CGST + SGST for intra-state, IGST for inter-state — without you having to decide each time. HSN and SAC codes carry the right rates, exports and SEZ supplies are handled as zero-rated inter-state, and because the classification is set correctly at the invoice, your GSTR-1 and GSTR-3B reconcile and your customers’ ITC flows cleanly. The single most error-prone decision in GST invoicing becomes automatic.