The place of supply decides which state should receive the tax and, with the supplier’s location, whether a transaction is intra-state (CGST + SGST) or inter-state (IGST). For goods it is generally where the goods are delivered; for services there are specific rules by service type.
Determining the place of supply correctly is the single most common source of GST billing errors, because it is not always the customer’s billing address.
For services between two registered businesses, the default place of supply is the recipient's location, which is why B2B service invoices usually follow the customer's GSTIN state. The defaults give way to specific overrides: services relating to immovable property are taxed where the property stands, restaurant and catering services where they are performed, and admission to events at the venue. The override list, rather than the default, is what practitioners actually need to memorise.
Goods have their own wrinkle in the bill-to ship-to transaction. Suppose a Delhi seller is instructed by a Delhi buyer to deliver goods straight to the buyer's customer in Mumbai. The law deems the place of supply for the first leg to be the instructing buyer's location — Delhi — so the seller charges CGST and SGST even though the lorry crosses into Maharashtra. The buyer then makes a second, inter-state supply to the Mumbai customer with IGST.
Getting it wrong is expensive to unwind: tax paid under the wrong head must be paid again under the right one and the original payment recovered as a refund, and the destination state may separately press its claim. The classic stumbles are hotel bills — always taxed in the hotel's state, never the guest's — event registrations, and property-related services billed off the client's address. Sound billing systems derive the head from ship-to and supply-type logic, not from whichever address was typed first.