Place of Supply Under GST: Domestic, Cross-Border and Intermediary Service Rules

Summary: Place of supply (POS) determines whether a GST transaction is inter-state or intra-state, which tax applies, and whether a cross-border supply qualifies as an export or import. The IGST Act contains separate POS rules for goods and services: Sections 10 and 11 govern goods, while Sections 12 and 13 govern services depending on whether the supplier and recipient are located in India or across borders. These rules become particularly important for multi-State businesses, bill-to-ship-to arrangements, immovable-property services, events, exports and businesses operating through multiple GST registrations. The Finance Act, 2026 omitted Section 13(8)(b), which had previously fixed the POS of intermediary services at the supplier’s location, bringing such services within the broader POS framework. The article examines the practical consequences of this change, the continuing definition of “intermediary”, questions concerning its application to pending disputes, and the importance of correct GSTIN selection and contractual documentation. It also discusses the Supreme Court’s decision in Union of India v. Mohit Minerals Pvt. Ltd. to demonstrate how POS and composite-supply provisions interact with the validity of an IGST levy.

Introduction

GST is a destination-based consumption tax, which means the revenue belongs to the State where goods or services are consumed, not where they were made. That idea only works if the law can tell us, for every transaction, where the supply is deemed to happen. Place of supply (POS) is the rule that answers this.

It matters for two reasons. First, it decides whether a supply is inter-state, attracting IGST, or intra-state, attracting CGST and SGST. Second, it decides whether a supply counts as an export or an import, which in turn determines whether it is zero-rated or taxable in India. Under Section 7 of the IGST Act, 2017, a supply is inter-state when the supplier’s location and the place of supply are in different States or Union Territories. Section 8 treats it as intra-state when both are in the same State. Get the POS wrong and you end up with the wrong tax, a broken credit chain, and possibly a demand notice carrying interest and penalty.

Legal Framework

Two regimes: domestic and cross-border

For services, the IGST Act splits the POS rules according to where the supplier and recipient are located. Section 12 applies when both are in India, and Section 13 applies when either is outside India. Goods are simpler, with one set of rules: Section 10 for domestic supplies and Section 11 for imports and exports. Everything turns on the terms “location of supplier” and “location of recipient”, which are defined in Sections 2(15) and 2(14).

Goods (Sections 10 and 11)

Section 10(1) deals with goods supplied within India, and its rules follow how the goods actually travel. Where goods move, the POS is the place where the movement ends, meaning delivery to the recipient (s. 10(1)(a)). Where the supplier delivers to a third person on the recipient’s direction, the goods are treated as received by the recipient’s nominee, so the POS is the nominee’s principal place of business (s. 10(1)(b)). Where goods don’t move at all, the POS is their location at the time of delivery (s. 10(1)(c)). Where goods are assembled or installed, the POS is the installation site (s. 10(1)(d)). Where goods are supplied on a conveyance such as a train, aircraft or ship, the POS is the place where they are taken on board (s. 10(1)(e)). Section 11 then covers cross-border trade: for imports the POS is the importer’s location, and for exports it is a location outside India.

Services within India (Section 12)

Section 12(2) sets the default rule. If the recipient is registered, the POS is the recipient’s location. If the recipient is unregistered, the POS is the recipient’s location where an address is on record, and the supplier’s location otherwise. On top of this default, there are special rules for telecommunication, banking and financial services, insurance, and advertising to governments.

Cross-border services (Section 13)

Section 13(2) again makes the recipient’s location the default. The exceptions include services performed on goods or on individuals who are physically present (s. 13(3)), services relating to immovable property (s. 13(4)), and events (s. 13(5)). Section 13(8) lists the categories where the supplier’s location governs instead, such as banking services to account holders and short-term hiring of means of transport.

Why the POS matters for exports

A service qualifies as an “export of services” under Section 2(6) only if five conditions are met: the supplier is in India, the recipient is outside India, the POS is outside India, payment is received in convertible foreign exchange (or in Indian rupees where the RBI permits), and the supplier and recipient are not merely establishments of a distinct person. Of these, the POS condition is where most disputes arise.

III. Contemporary and Practical Analysis

Case study: a Bengaluru company, a Delhi client, and a Mumbai conference

Imagine “TechServe Pvt Ltd”, registered in Karnataka, which supplies consulting services to “BuildCo”, registered in Delhi. The same two parties can produce very different POS outcomes depending on what is being supplied.

Start with the consulting itself. BuildCo is a registered person, so s. 12(2) points to its location, Delhi. TechServe’s location is Karnataka, so the supply is inter-state and attracts IGST. Now suppose BuildCo holds GST registrations in several States under one PAN. The “location of the recipient” is then the registered place for which the invoice is raised, which is the one whose GSTIN appears on it. Quoting the wrong GSTIN means the wrong tax head and potentially blocked input credit for the client.

Next, suppose TechServe’s staff attend a client workshop and BuildCo pays for a venue in Mumbai. Section 12(3) fixes the POS for that venue in Maharashtra, regardless of where either company is registered. Finally, suppose BuildCo directs TechServe to ship hardware straight to its Pune subsidiary. Section 10(1)(b) then treats the subsidiary as the recipient, the POS is Maharashtra, and TechServe charges IGST. Same company, same counterparty, three different outcomes.

A recent development: omission of the intermediary rule

For years, Section 13(8)(b) treated “intermediary services” differently. The POS for such a service was the intermediary’s own location, so an Indian agent serving a foreign principal was making a domestic supply rather than an export. Section 2(13) defines an intermediary as a broker, agent or anyone who arranges or facilitates a supply between two or more persons, excluding someone who supplies on their own account. The provision became one of the most litigated and commercially significant parts of the GST framework. The GST Council recommended its omission at its 56th meeting on 3 September 2025, and the Finance Act 2026, which received Presidential assent on 30 March 2026, omitted Clause (b) of Section 13(8). The stated aim was to bring intermediary services within the general rule in Section 13(2), so that the recipient’s location becomes the POS.

In practice, an Indian intermediary serving an overseas client can now potentially qualify for zero-rated export treatment, subject to the other conditions of Section 2(6), and can claim refunds of input tax credit. The change cuts the other way too. An Indian business that buys intermediary services from a foreign supplier may now be treated as importing a service, taxable under reverse charge.

Critical Discussion

The first problem is that the effective date is unsettled. The Finance Act is silent on when the omission takes effect, although the Finance Bill’s explanatory table indicated 1 April 2026. If the omission is treated as a repeal, Sections 6 and 6A of the General Clauses Act, 1897 raise the question of how pending demands for earlier periods should be handled. Commentators point to the Supreme Court’s Fibre Boards decision as the leading authority that express omissions count as repeal, and taxpayers with pending intermediary disputes will be watching closely.

A second difficulty is that the definition of “intermediary” survives. Section 2(13) remains intact, and it is unclear whether intermediary services will now uniformly fall under Section 13(2) or whether the specific rules in Sections 13(3) to 13(13) can still apply, depending on the nature of the underlying service. The dispute may simply shift from “where is the POS?” to “is this an intermediary service at all, and which POS rule governs it?”

Third, there is the old problem of locating the supplier and the recipient. Both depend on where the entity has a “fixed establishment” and which establishment is most directly concerned with the supply. For companies with multiple registrations, or for remote and digital services, this factual question is often contested.

Fourth, the sheer complexity creates a real compliance burden. Section 12 alone has more than a dozen sub-rules, and a bundled supply, such as a conference venue plus catering plus consulting, can fall under several POS provisions at once. The composite-supply principle in Section 8 of the CGST Act then decides which rule governs. Small businesses often rely on software defaults, and software cannot interpret a mixed contract.

Finally, there are constitutional and tax-neutrality concerns. The Supreme Court’s decision in Union of India v. Mohit Minerals Pvt. Ltd. (2022) shows how POS-linked levies can end in double taxation. The Court struck down the reverse-charge levy of IGST on ocean freight in CIF contracts, because the Indian importer was already paying tax on the composite supply. It is a reminder that POS rules cannot be applied mechanically without checking whether the result is a lawful charge.

Conclusion and Suggestions

Place of supply is the connecting link in GST. It decides which State receives the revenue, which tax head applies, and whether a cross-border supply is an export or an import. The framework is easy to state in the abstract, since goods follow movement and services mostly follow the recipient, with carefully drawn exceptions. Applying it is much harder, especially for multi-state businesses, bundled supplies and cross-border services.

The 2026 omission of Section 13(8)(b) is a welcome step toward the destination principle and global VAT practice, but its incomplete execution leaves some gaps. First, a clear effective-date notification or CBIC circular is needed, with transitional guidance on pending cases. Second, guidance is needed on how Section 13(2) interacts with the specific rules in Sections 13(3) to 13(13) for services that were previously classed as intermediary. Third, CBIC should publish a simplified POS reference table with worked examples for common situations such as bill-to-ship-to, hybrid contracts and multi-GSTIN recipients. Taxpayers, for their part, can protect themselves by recording the correct recipient GSTIN on every invoice, documenting the contract terms that decide the POS, and reviewing how they have classified “intermediary” services in the past.

If the law is clear on where tax is payable, businesses can comply and the revenue reaches the right State. Until then, POS will remain one of the most contested areas of Indian indirect tax.