February 23, 2023

Understanding Place of Supply of Goods and Treatment of Ex-factory Supply in India

As a business owner or startup founder in India, it’s essential to understand the concept of Place of Supply of Goods and Treatment of Ex-factory Supply. These two concepts are crucial for determining the tax implications of your business operations.

Place of Supply of Goods

The Place of Supply of Goods determines the location where a supply of goods is considered to have taken place. It’s used to determine the taxability of a transaction and the applicable tax rate. The location of the recipient of the goods is used to determine the Place of Supply.

For example, if you’re a manufacturer in Mumbai selling goods to a customer based in Delhi, the Place of Supply will be Delhi. This means that the transaction will be taxed according to the GST laws applicable in Delhi.

There are different rules for determining the Place of Supply of Goods for different types of transactions. For instance, the Place of Supply for goods transported by the supplier will be the location where the goods are handed over for transportation. On the other hand, the Place of Supply for goods installed or assembled at the customer’s location will be the customer’s location itself.

Treatment of Ex-factory Supply

Ex-factory supply refers to the supply of goods by a manufacturer or supplier directly from their factory or warehouse. There are certain GST implications that need to be considered while making Ex-factory supply.

If the supplier makes an ex-factory supply of goods, they’re not required to pay GST on the transaction. However, the buyer of the goods will be liable to pay the applicable GST on the purchase price. This means that the buyer will need to account for the GST in their return and pay the tax accordingly.

It’s important to note that the buyer should not claim the input tax credit for the GST paid on the purchase of goods from the supplier’s factory or warehouse. The input tax credit can only be claimed if the goods are transported to a different location and then sold or used.


Understanding the concept of Place of Supply of Goods and Treatment of Ex-factory Supply is crucial for all business owners and startup founders in India. By understanding the tax implications of these concepts, you can ensure that your business operations are compliant with GST laws and avoid any penalties or legal issues.


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