Place of Supply Rules for Online Sellers

By TallySutra Team · 29 July 2026 · 5 min read

Every single order you ship answers a question you may never have consciously asked: is this an intra-state supply (CGST + SGST) or an inter-state supply (IGST)? The answer comes from the place of supply rules, and for marketplace sellers the volume makes it unforgiving — a systematic mistake repeats itself across thousands of orders. This guide explains the rule for B2C goods, why it matters everywhere from GSTR-1 to TCS, and how to keep the split accurate at scale.

The core rule for B2C goods

For goods sold to consumers where the supply involves movement, the place of supply is the location where the movement terminates for delivery — in plain terms, the delivery state. Combine that with your registration state and the tax type falls out mechanically:

Note the third row: when you stock inventory in a marketplace warehouse in another state under a separate registration, the supplying state is the warehouse's state, not your home state. Which GSTIN ships the order determines which side of the comparison you are on — one of several reasons warehouse programs create registration questions, covered in our multi-state registration guide.

One column in the marketplace data decides everything: which GSTIN fulfilled the order. Sellers enrolled in warehouse programs must read the fulfilment channel and warehouse identifiers in their reports to attribute each order to the correct registration before the intra-versus-inter comparison is even made. Union territories add a small twist — supplies within a union territory use UTGST in place of SGST — but the delivery-state principle is unchanged. Whatever the combination, the rule is mechanical once the supplying GSTIN and delivery state are known; the craft lies entirely in reading those two fields correctly at volume.

Why the split ripples through everything

Place of supply is not a labelling nicety. It determines:

• Which tax you owe. Charging CGST/SGST where IGST was due (or vice versa) is paying the wrong tax, not a rounding issue — corrections involve paying the right head and seeking adjustment of the wrong one.
• Your GSTR-1 state-wise B2C tables. B2C supplies are reported place-of-supply-wise; wrong state mapping distorts the whole table.
• The TCS head. Operators collect TCS as CGST+SGST on intra-state supplies and IGST on inter-state ones, so a split mismatch between you and the operator shows up when you reconcile TCS credit.
• Settlement reconciliation. Marketplace tax reports compute tax per order using the ship-to state; if your books use a different rule, they will never tie.

Reading the marketplace data correctly

The good news: marketplaces already capture the delivery state on every order, and their sales/tax reports carry a ship-to state column. The failure modes are operational:

1. Using the billing address instead of the shipping address. For goods, delivery governs; reports usually expose both, and picking the wrong column flips the tax type on gift orders and B2B-ish orders.
2. Collapsing orders into daily lump entries. A single "marketplace sales" journal per day erases the state dimension entirely, making state-wise GSTR-1 reporting reconstruction work.
3. Mishandling returns. A credit note must reverse tax under the same head as the original supply — a Maharashtra IGST sale returns as a Maharashtra IGST credit note, regardless of when or where it lands back.

Doing this at marketplace scale

Per-order place-of-supply handling is exactly the kind of rule a human applies inconsistently and software applies uniformly. TallySutra reads the ship-to state on every row of your Amazon, Flipkart, and Meesho reports, derives intra- versus inter-state per order against the supplying GSTIN, and generates balanced TallyPrime vouchers with the correct CGST/SGST or IGST ledgers per line — with exceptions queued for rows where the state data is ambiguous rather than silently guessed.

Edge cases to take to a professional

This article covers the mainstream B2C goods rule. Real catalogues produce edges: bill-to/ship-to combinations for registered buyers, supplies to union territories, exports through marketplaces, services bundled with goods, and operator-liable categories. Place of supply is also an area where getting it wrong has cash consequences in both directions. Treat this as educational grounding and have a qualified CA or tax professional confirm the treatment for any pattern beyond plain B2C goods delivery — and for a wider view of the compliance stack, start from our GST guide for e-commerce sellers.

Frequently asked questions

Related reading

• Common GST Notices for E-commerce Sellers
• Year-End GST Checklist for Online Sellers
• Fixing GST Mismatches: Reports vs Books
• Credit Notes and GST on Marketplace Returns