CGST, SGST & IGST Explained: Place of Supply Made Simple

The single most common GST mistake small businesses make is charging the wrong type of tax — splitting it into CGST and SGST when it should have been IGST, or the reverse. The good news: the rule behind it is genuinely simple once you understand the idea of place of supply. This guide breaks it down with examples.

Why three taxes?

India runs a dual GST model because both the Centre and the States have the power to tax. So a single transaction's GST is shared:

• CGST — Central GST, collected by the central government.
• SGST — State GST, collected by the state government (called UTGST in union territories).
• IGST — Integrated GST, a single combined tax for inter-state transactions, collected by the Centre and later apportioned to the destination state.

Crucially, the total tax is the same either way. An 18% supply is taxed at 18% whether it's CGST+SGST (9% + 9%) or IGST (18%). The split only decides who gets the revenue — but it must still be shown correctly on the invoice.

The place-of-supply rule

Here's the whole rule in one sentence: compare the location of the supplier with the place of supply.

• Same state → it's an intra-state supply → charge CGST + SGST (half each).
• Different states → it's an inter-state supply → charge IGST (full rate).

So the decision hinges on two locations: where you (the supplier) are, and where the supply is deemed to happen.

Worked examples

Let's make it concrete with a supplier registered in Maharashtra:

Example 1 — intra-state. You sell goods worth ₹10,000 (GST 18%) to a customer in Maharashtra. Place of supply = Maharashtra = your state. You charge CGST ₹900 + SGST ₹900 = ₹1,800. Invoice total ₹11,800.

Example 2 — inter-state. You sell the same ₹10,000 of goods to a customer in Gujarat. Place of supply = Gujarat ≠ your state. You charge IGST ₹1,800. Invoice total ₹11,800. Same total, different tax type.

Example 3 — services to another state. You're a designer in Maharashtra invoicing a client in Karnataka. The default place of supply for services is the recipient's location = Karnataka. So you charge IGST.

Example 4 — same total, customer's perspective. A GST-registered buyer can claim input tax credit either way. The split doesn't change what they pay; it just determines which credit ledgers (CGST/SGST/IGST) the credit lands in.

A common trap: billing vs shipping address

What if your customer's billing address is in one state but the goods ship to another? For goods, it's the delivery destination that usually drives the place of supply, not the billing address. So if a Delhi-headquartered company asks you to deliver to their Haryana warehouse, the place of supply is typically Haryana. Always confirm where the goods actually go.

The "Bill to / Ship to" scenario

GST has specific provisions for three-party transactions (you bill one party but ship to another, common in drop-shipping and distributor chains). The principle: the place of supply for the leg you're invoicing follows the instruction of the party directing the movement. If this is a regular part of your business, it's worth getting your accountant to map out your typical flows once so you can apply them consistently.

How this shows up on the invoice

Your invoice must display the tax split that matches the transaction:

Transaction	Tax columns shown
Intra-state	CGST + SGST (each at half the rate)
Inter-state	IGST (full rate)

If you ever see CGST+SGST on an invoice to another state, or IGST on a same-state sale, something is wrong — fix it before issuing, because the wrong split can complicate your customer's credit and your own returns.

Cess and special cases

A few goods (such as certain luxury and "sin" items) also attract GST compensation cess on top of GST. Most small businesses never deal with cess, but if you trade in those categories, your invoice needs an extra cess line. And some supplies are exempt or zero-rated (notably exports), which follow their own rules — exports are typically treated as inter-state and can be made without payment of tax under a LUT, or with IGST paid and later refunded.

The bottom line

CGST, SGST and IGST aren't three different burdens — they're the same total tax, divided based on whether your sale stays inside your state or crosses a border. Anchor every invoice on one question — is the place of supply my state? — and you'll get the split right every time.

Want to sanity-check the maths? Our free GST Calculator shows the CGST/SGST or IGST breakup instantly for any amount and rate, and the Invoice Generator applies it for you based on the states you select.