GST Place of Supply of Services: Understanding the Legal Framework Under the IGST Act

Introduction: Why Place of Supply Matters Under GST

The Goods and Services Tax regime in India operates on a fundamental principle — it is a destination-based consumption tax. In simple terms, the tax revenue must flow to the government authority that has jurisdiction over the place where the goods or services are ultimately consumed. To operationalize this principle, every stakeholder under GST must correctly determine the Place of Supply (POS) — the legally recognized location where a supply is deemed to have occurred.

When it comes to services specifically, two critical parameters govern whether a transaction is classified as intra-State or inter-State:

  1. Location of Supplier of Service (LS)
  2. Place of Supply of Services (POSoS)

This determination is not merely procedural — it has direct consequences on which tax is applicable (CGST + SGST for intra-State, or IGST for inter-State), which government receives the revenue, and whether input tax credit can be seamlessly availed by the assessee.

Types of Supply Under GST

Intra-State Supply

An intra-State supply arises when both the Location of the Supplier (LS) and the Place of Supply (POS) fall within the same State. In such cases, Central GST (CGST) and State GST (SGST) are levied.

Inter-State Supply

An inter-State supply arises when the LS and POS are located in different States. Section 7 of the Integrated Goods and Services Tax Act, 2017 (IGST Act) recognizes four distinct categories of inter-State supply:

  1. Domestic Inter-State Supply — supply between two different States, two different Union Territories, or between a State and a Union Territory.
  2. Cross-Border Supply — covering import and export of services.
  3. Supply involving SEZ Developers or SEZ Units.
  4. Any other supply that does not qualify as intra-State.

Note: For the purpose of this article, references to Domestic Place of Supply of Services will primarily be in the context of supply between two different States, though the same principles equally apply to inter-UT and State-UT transactions.

Cross-Border Supply — A Special Category

Cross-border supply encompasses:

  • Import of Services
  • Export of Services

It is important to note that under the GST framework, the receipt of foreign convertible exchange is a mandatory condition for a supply to qualify as an export of services. This is a key distinction from the earlier Place of Provision of Services Rules, 2012 under the erstwhile service tax regime, where non-receipt of foreign currency did not attract service tax liability, but only affected input credit eligibility.

The Core Framework of Place of Supply of Services (POSoS)

The POSoS provisions form the backbone of GST compliance for the service sector. Three primary factors must be analyzed:

  1. Location of Supplier of Service (LS)
  2. Location of Recipient of Service (LR)
  3. Place of Supply of Services (POSoS)

The foundational principle under GST is that the POSoS defaults to the Location of the Recipient of Service (LR). However, numerous exceptions exist — particularly for performance-based services, immovable property services, event-based services, and transportation services — where the determining criterion shifts to factors such as the site of actual performance, the location of the property, or the point of embarkation.

The study of POSoS is divided into two distinct heads:

  • Domestic POSoS — where both LS and LR are within India [Section 12 of the IGST Act]
  • Cross-Border POSoS — where either LS or LR is situated outside India [Section 13 of the IGST Act]

Domestic Place of Supply of Services — Section 12 of the IGST Act

India's GST architecture is unique in that despite the "One Nation, One Tax" philosophy, each State functions as an independent taxing jurisdiction. Tax credits earned in one State cannot be offset against liabilities arising in another State — a mechanism commonly referred to as ring-fencing. This makes the accurate determination of Domestic POSoS critically important for every assessee.

General Rule — POSoS Defaults to Location of Recipient [Section 12(2)]

The default rule under Section 12(2) provides:

  • In B2B transactions (supply to a GST-registered recipient): POSoS = Location of the registered recipient (LR)
  • In B2C transactions (supply to an unregistered person):
    • POSoS = Address of the recipient as available in the supplier's records
    • Where no such address is available: POSoS = Location of the Supplier (LS)

This default rule applies unless a specific provision under any other sub-section of Section 12 overrides it.

Immovable Property Services [Section 12(3)]

For services directly connected to immovable property, the POSoS shall be the location where the immovable property is situated (or is intended to be located in the case of properties yet to come into existence). The following categories fall within this provision: