CGST, SGST and IGST Explained: How Place of Supply Decides the Tax

The Taxes in One Minute

• CGST (Central GST) — collected by the central government on supplies within a state.
• SGST (State GST) — collected by the state government on the same intra-state supplies.
• UTGST (Union Territory GST) — used instead of SGST in union territories without their own legislature.
• IGST (Integrated GST) — collected by the central government on inter-state supplies, imports, and exports, and then shared with the destination state.

On an intra-state supply, the GST rate is split equally between CGST and SGST (or UTGST). On an inter-state supply, the full rate is charged as IGST. So the customer usually pays the same total either way.

The Basic Rule: Compare Two Locations

Compare the location of your business (the supplier) with the place of supply:

• Same state or union territory → intra-state supply → charge CGST + SGST (or UTGST).
• Different states → inter-state supply → charge IGST.

Exports, and supplies to units in a Special Economic Zone (SEZ), are treated as inter-state supplies even when the SEZ is in your own state. A quick sanity check for registered customers: the first two digits of a GSTIN are the state code of that registration.

Working Out the Place of Supply

The Integrated GST Act sets out the rules. The general ones cover most small businesses:

For Goods

• If you move the goods (deliver or ship them), the place of supply is where the movement ends for delivery to the customer.
• If you deliver to one party on the instructions of another (“bill to” one customer, “ship to” another), the place of supply is generally the principal place of business of the party you bill.
• If the goods don’t move — for example, a customer buying over the counter — the place of supply is where the goods are when they are handed over.
• If the goods are installed or assembled on site, it is the place of installation.

For Services

• For a registered customer, the place of supply is generally the customer’s location.
• For an unregistered customer, it is generally the customer’s address on your records, or your own location if you don’t have one.

Many services have their own specific rules — for example, services related to immovable property, restaurant and catering, events, passenger and goods transport, and telecom. If you supply any of these, check the specific rule rather than the general one.

Worked Examples

1. A shop in Pune sells to a walk-in customer at the counter. The goods are handed over in Maharashtra, the shop is in Maharashtra — CGST + SGST.
2. A Pune wholesaler ships goods to a retailer in Bengaluru. Delivery ends in Karnataka, the supplier is in Maharashtra — IGST.
3. A Chennai consultant bills a GST-registered company located in Chennai — CGST + SGST. The same consultant billing a registered company in Ahmedabad — IGST.
4. A Pune business bills a customer in Nagpur but ships to that customer’s site in Indore on their instruction. Under the bill-to/ship-to rule, the place of supply generally follows the billed party (Maharashtra) — CGST + SGST.

What If You Charge the Wrong Tax?

Charging CGST and SGST when IGST was due (or the other way round) is not fixed by a simple adjustment between the two. The usual remedy is to pay the tax under the correct head and claim a refund of the tax paid under the wrong one — and in the meantime your customer’s input tax credit may be affected. It is far cheaper to get the place of supply right when you bill.

How BizPro Helps

In BizPro you set your business tax mode to GST and record your state once. On each invoice you enter the place of supply, and BizPro splits the tax into CGST + SGST when it matches your state or charges IGST when it doesn’t — then totals each head in the GST summary report for your accountant. Read more about GST billing in BizPro , or see the companion guide on what a GST tax invoice must include .