What is Place of supply for online sales?

Why it matters

GST is a tax on consumption, so the tax goes to the state where goods or services are consumed. For every sale, the seller compares two things:

• the location of the supplier: the state of the GSTIN making the sale, usually where the goods are shipped from;
• the place of supply: the state the law treats as the destination.

If they are in the same state, the seller charges CGST and SGST. If they are in different states, it charges IGST.

Goods sold online to consumers

For goods supplied to an unregistered buyer, such as a consumer, the place of supply is the location in the address of the buyer recorded on the invoice. Recording the buyer's state is treated as recording the address. If no address is recorded, the place of supply is the supplier's location.

Where the billing address and the delivery address differ, as with gifts, CBIC has clarified that for goods sold online the delivery address on the invoice decides the place of supply. Make sure your invoices and marketplace tax reports carry the delivery address.

Goods sold to registered buyers

For a sale to a business, the place of supply is generally where the movement of goods ends, at delivery to the buyer. Where goods are delivered to a third party on the buyer's instructions ("bill to, ship to"), the place of supply is the principal place of business of the person who gave the instructions.

Stock in many states

When a marketplace ships an order from its fulfilment centre in Haryana to a customer in Haryana, the sale is made by your Haryana GSTIN, and it is an intra-state sale there, with CGST and SGST. The same product shipped from your Delhi warehouse to Haryana would be an inter-state sale by your Delhi GSTIN, with IGST. The marketplace's tax reports show which GSTIN made each sale. Report each sale under that GSTIN.

Getting it wrong

If you charge CGST and SGST on what should be IGST, or the reverse, you pay the correct tax and then claim a refund of the tax wrongly paid. It cannot simply be moved from one head to the other. Interest is not charged on the correct tax paid in this way, but the refund takes time and paperwork, so set the place of supply rules correctly in your software and marketplace settings from the start.