How do I know whether to charge IGST or CGST and SGST?
Two things decide it: where the supply comes from (the state of the GSTIN you ship under) and the place of supply.
- Same state: an intra-state supply. Charge CGST and SGST, each half the rate. A 5% item is 2.5% CGST and 2.5% SGST.
- Different state: an inter-state supply. Charge IGST at the full rate, 5%.
The total tax is the same either way. What changes is which government receives it, which is why the portal checks it and why a wrong head has to be paid again under the right one.
What is the place of supply for an online order?
Sales to consumers (unregistered buyers)
Since 1 October 2023, section 10(1)(ca) of the IGST Act says that for a supply of goods to an unregistered person, the place of supply is the location in the address recorded on the invoice, and your own location if no address is recorded. Recording just the buyer's state counts as recording the address.
CBIC's Circular 209/3/2024-GST (26 June 2024) settled the online case: where the billing address and the delivery address on the invoice differ, the place of supply is the delivery address.
Sales to registered businesses
For a buyer with a GSTIN, the place of supply is where the movement of goods ends for delivery to the buyer (section 10(1)(a)). When the buyer tells you to deliver to someone else, a customer of theirs, say, the buyer is treated as having received the goods, and the place of supply is the buyer's principal place of business (section 10(1)(b)). A buyer registered in more than one state should give you the GSTIN of the state where it wants the goods received.
Exports
Goods delivered outside India are an export, a zero-rated supply: either shipped under a letter of undertaking (LUT) without tax, or with IGST paid and refunded later.
Worked examples
A store registered in Karnataka (state code 29), shipping from Bengaluru:
| The order | Place of supply | Tax |
|---|---|---|
| Consumer, delivered in Mysuru | Karnataka | CGST + SGST |
| Consumer, delivered in Chennai | Tamil Nadu (33) | IGST |
| Consumer billed in Bengaluru, gift delivered in Pune | Maharashtra (27), the delivery address | IGST |
| Consumer, no address or state on the invoice | Karnataka, the supplier's location | CGST + SGST |
| Consumer, delivered in Singapore | Outside India | Export, zero-rated |
| Business with a Delhi GSTIN (07), delivered to its Delhi office | Delhi | IGST |
What if I ship from more than one state?
Each state you hold stock in needs its own GSTIN. The supply comes from the GSTIN of the warehouse that ships the order, so an order to a Maharashtra customer shipped from your Maharashtra warehouse is intra-state there: CGST and SGST, invoiced under your Maharashtra GSTIN. The same order shipped from Karnataka is inter-state: IGST under your Karnataka GSTIN.
What if I charged the wrong tax?
If you charged CGST and SGST on what was really an inter-state sale, or IGST on an intra-state one, you pay the correct tax and claim a refund of the tax paid under the wrong head (section 77 of the CGST Act and section 19 of the IGST Act). No interest is charged on the correct tax in that case, but the money is tied up until the refund arrives, so the cheaper fix is a correct invoice in the first place.
Where it goes wrong on Shopify
- Billing state used instead of the delivery state. The delivery state wins for consumers.
- A missing state. Shopify's Indian checkout asks for a state, but orders imported, created by hand, or from apps sometimes arrive without one. Without it, the invoice cannot name the place of supply.
- Stock shipped from a warehouse that is not on your registration. A third-party warehouse in another state is a place of business there, and needs a GSTIN.