Place of Supply Under GST for Domestic and Cross-Border Intermediary Services: Evolving Rules and Practical Impact

1. Conceptual Background: Why “Place of Supply” Matters

Goods and Services Tax in India is designed as a destination-based consumption levy. In principle, the exchequer of the State where goods or services are finally consumed should receive the revenue. For that design to function, the law must attribute every supply to a notional “place” where it is deemed to occur. This connecting rule is the place of supply (POS).

Correct determination of POS is central for two broad reasons:

  • It identifies whether a supply is inter-State (liable to IGST) or intra-State (liable to CGST + SGST).
  • It determines whether a cross-border transaction is characterized as an export or import of goods/services, thereby guiding whether it is zero-rated, taxable under reverse charge, or otherwise.

Under Section 7 of the IGST Act, 2017, a supply becomes an inter-State supply when the location of the supplier and the place of supply fall in different States or Union Territories. Conversely, Section 8 covers intra-State situations where both locations are within the same State or Union Territory.

An incorrect POS classification can lead to:

  • Wrong tax type (IGST instead of CGST+SGST or vice versa)
  • Break in input tax credit chain
  • Subsequent departmental notices for short payment, interest, and penalty

Accordingly, businesses—especially those with operations in multiple States or cross-border activities—must approach POS analysis methodically.

2. Statutory Framework: POS Rules for Goods and Services

The IGST Act segregates POS rules differently for goods and services, and further sub-classifies services based on whether the parties are located in India or across borders.

2.1. Two Distinct Regimes

  • Goods

    • Domestic transactions: Section 10
    • Imports and exports: Section 11

  • Services

    • Both supplier and recipient in India: Section 12
    • Either supplier or recipient (or both) outside India: Section 13

Key foundation concepts—location of supplier and location of recipient—are contained in Section 2(15) and Section 2(14) respectively and must be read carefully while applying any POS rule.

3. POS Rules for Goods: Sections 10 and 11

3.1. Domestic Supplies (Section 10)

Section 10(1) provides multiple clauses that follow the commercial movement or situs of the goods:

  1. Movable supplies with movement – s. 10(1)(a)
    Where goods are required to be moved, POS is the location where the movement of goods terminates for delivery to the recipient.

  2. “Bill-to-ship-to” / third-party delivery – s. 10(1)(b)
    Where the supplier delivers goods to a person other than the recipient on the recipient’s direction, the law treats the goods as received by such third person on behalf of the recipient. POS becomes the principal place of business of that third person.

  3. No movement of goods – s. 10(1)(c)
    Where there is no movement (e.g., sale of goods on “as is where is” basis), POS is where goods are located at the time of delivery.

  4. Assembly or installation – s. 10(1)(d)
    Where goods are supplied by way of assembly or installation at a site, the POS is the place of such installation.

  5. On-board supplies – s. 10(1)(e)
    For goods supplied on board a conveyance (train, aircraft, vessel, motor vehicle), POS is the location where such goods are taken on board.

3.2. Cross-Border Goods (Section 11)

  • Import of goods – POS is the location of the importer in India.
  • Export of goods – POS is outside India.

4. POS Rules for Services Within India: Section 12

Section 12 addresses situations where both supplier and recipient are located in India.

4.1. Default Rule: Section 12(2)

  • If the recipient is a registered person:
    POS = Location of such registered recipient.

  • If the recipient is unregistered:

    • POS = Recipient’s address on record, where available;
    • If no address is on record, POS defaults to the supplier’s location.

4.2. Special Rules for Certain Services

Beyond this default, Section 12 prescribes dedicated POS rules for:

  • Telecommunication services
  • Banking and financial services
  • Insurance services
  • Advertising services supplied to Government, etc.

Each of these must be examined transaction-wise to decide whether the general rule or a specific exception applies, particularly where bundled or composite contracts are involved.

5. POS for Cross-Border Services: Section 13

Section 13 governs services where either the supplier or the recipient (or both) are outside India.

5.1. General Rule: Section 13(2)

By default, POS is the location of the recipient of services. If the recipient’s location is not available, POS reverts to the location of the supplier.

5.2. Major Exceptions

Key specialized rules under Section 13 include:

  • Services physically performed on goods or individuals – s. 13(3)
    POS where services are actually performed.