Place of Supply of Services – General Rules (Section 12(2))

1. Introduction

Goods are tangible — they move from one place to another. But services? They’re intangible, making it harder to figure out where they’re actually supplied.

When the Goods and Services Tax (GST) came into force, India needed clear rules for determining the place of supply (PoS) for services. That’s where Section 12 and Section 13 of the Integrated Goods and Services Tax (IGST) Act, 2017 come in.

👉 Section 12 deals with domestic supplies — when both supplier and recipient are in India.

👉 Section 13 deals with international services — when one party is outside India.

In this blog, we’ll focus on Section 12(2) — the General Rule that applies to most service transactions unless a specific rule covers them.

2. What Section 12(2) Says

The law states:

In simple words:

• For registered recipients, the place of supply = recipient’s location.
• For unregistered recipients, it depends on whether their address is available.

⇒ If available → recipient’s address.

⇒ If not → supplier’s location.

3. Why It Matters

This rule is the backbone of service taxation under GST. It ensures that:

• The correct State or Union Territory gets GST revenue.
• Intra-State or Inter-State classification is accurate.
• Businesses charge the right type of tax (CGST + SGST or IGST).

Without this rule, confusion would arise — especially for online, consultancy, or B2B services where physical delivery doesn’t exist.

4. Key Terms Explained

(a) Location of Supplier of Services

As per Section 2(15) of IGST Act — It means the registered place of business (or fixed establishment) from which the service is provided.

(b) Location of Recipient of Services

As per Section 2(14) — It refers to the registered business location (or fixed establishment) where the service is received.

These definitions are important because GST links taxation to where each party is located, not just where the service is performed.

5. The Core Principle of Section 12(2)

This section follows the “destination-based taxation” concept — tax belongs to the State where the service is consumed, not where it’s supplied from.

So, if a consultant in Delhi provides advisory service to a company registered in Mumbai, Maharashtra gets the GST share — because that’s where the service is consumed.

6. Understanding with Practical Examples

Let’s simplify Section 12(2) with clear, real-world examples.

Example 1 – B2B Service (Registered Recipient)

Scenario: A Chartered Accountant (CA) in Delhi provides audit services to a client registered in Gujarat.

• Recipient is registered → apply clause (a)
• Place of Supply = Location of Recipient = Gujarat
• Type of Tax = Inter-State (IGST)

Even though the service is rendered in Delhi, GST revenue goes to Gujarat because that’s where the registered client is located.

Example 2 – B2C Service (Unregistered Recipient with Address)

Scenario: A marketing consultant in Mumbai provides services to a startup founder in Pune (Maharashtra) who isn’t registered under GST.

• Recipient is unregistered → clause (b) applies
• Recipient’s address available → PoS = Pune, Maharashtra
• Tax = Intra-State (CGST + SGST)

Example 3 – B2C Service (No Address Available)

Scenario: A freelance graphic designer in Kolkata provides logo design to a casual client found via social media. The client pays via UPI and gives no address.

• Recipient unregistered → address not on record → PoS = Location of supplier (Kolkata)
• Tax = Intra-State (CGST + SGST)

Example 4 – Registered Company with Multiple Branches

Scenario: ABC Ltd. has its head office in Bangalore and a registered branch in Hyderabad. A law firm in Hyderabad provides legal services for ABC’s Hyderabad branch.

• Recipient is registered (branch has GSTIN) → PoS = Hyderabad
• Tax = Intra-State (CGST + SGST)

If the same law firm billed the Bangalore head office, the PoS would have been Karnataka → IGST applicable.

7. Flow Chart – Section 12(2) Decision

Is recipient registered? ↓

YES → PoS = Recipient’s location ↓

NO → Is recipient’s address on record? ↓

YES → PoS = Recipient’s address ↓

NO → PoS = Supplier’s location

8. Why the Rule Differentiates Registered and Unregistered

• Registered recipients (B2B): Already identifiable in GST records → easier to assign PoS.
• Unregistered (B2C): Need address proof to link the supply to a State. If unavailable, default to supplier’s location.

This structure ensures every service supply falls somewhere — no transaction remains untaxed or “state-less.”

9. Relationship with Other Sub-sections

Section 12(2) acts as the default rule. If a service doesn’t fit into any of the special sub-sections (like real estate, training, telecom, transportation, etc.), it falls under this general category.

Some key exceptions:

So, Section 12(2) applies only when no other specific rule governs the service.

10. Latest Clarifications and 2024–25 Updates

These updates help prevent misreporting and ensure accurate IGST vs. CGST/SGST classification.

11. Common Mistakes to Avoid

• Treating B2B service as B2C — wrong tax applied.
• Missing recipient address in invoice → wrong PoS.
• Charging CGST + SGST when recipient is in another State.
• Ignoring GSTIN of the branch that actually received the service.
• Reporting wrong State code in GSTR-1.

Tip: Always verify GSTIN, address, and location before issuing an invoice.

12. Documentation & Compliance Checklist

• Verify recipient registration (via GSTIN lookup).
• Mention full address and State code on invoice.
• Include PoS field correctly in e-invoice.
• Maintain engagement letters / agreements showing service recipient’s address.
• Match invoice PoS with GSTR-1 and GSTR-3B filings.

13. Comparison: Section 12(2) vs. 13(2)

So, Section 12(2) covers domestic scope, while Section 13(2) governs cross-border service supplies.

14. Illustrative Case Studies

Case 1 – IT Support to Registered Client

TechServe Pvt. Ltd. (Bengaluru) provides cloud maintenance services to FinCore Ltd. (Chennai, Tamil Nadu).

• Recipient registered → PoS = Chennai.
• Tax = IGST.

Case 2 – Online Tutoring to Individual

TutorMe (Delhi) offers online language training to an unregistered student in Mumbai.

• Recipient unregistered, address available → PoS = Mumbai.
• Tax = CGST + SGST (Maharashtra).

Case 3 – Design Service without Address

Freelancer in Kolkata sells designs online to random clients across India without collecting address.

• PoS = Kolkata (supplier’s location).
• Tax = CGST + SGST (West Bengal).

15. Simplified Summary Table

16. Why Section 12(2) Is Important for Businesses

• It directly affects whether you charge IGST or CGST+SGST.
• Impacts GST returns and cross-utilization of credits.
• Incorrect PoS can lead to tax shortfall or duplication.
• It’s the foundation for determining PoS before checking other specific sub-sections.

Businesses providing consultancy, freelancing, digital services, or professional work rely heavily on this rule.

17. Real-World Implications

For small businesses and professionals — CAs, architects, IT firms, and freelancers — this section determines how they raise invoices.

It helps ensure:

• Correct tax head used.
• Compliance with destination-based taxation.
• Avoidance of scrutiny for wrong State-wise reporting.

18. Key Takeaways

• Section 12(2) is the default rule for determining PoS of services.
• For registered recipients → PoS = recipient’s location.
• For unregistered → PoS = recipient’s address or supplier’s location.
• Always check GSTIN, address, and State code before invoicing.
• Wrong PoS = wrong tax = possible penalties or refunds later.

19. Quick Recap Table

20. Final Thoughts

Section 12(2) may seem simple, but it’s one of the most frequently applied and misunderstood rules under GST.

It forms the foundation of place of supply for services — ensuring taxes flow to the correct State and preventing disputes.

In essence:

So whether you’re a freelancer, consultant, or large service firm, remember: your client’s registration and address decide your tax type. Get this right, and your GST compliance will stay rock solid.

Also Read: GST Place of Supply: Imports and Exports Explained