Running our startup over the past years exposed us to a lot of compliance issues, and it slowly became clear that there had to be a better way to handle them. In this post, we'll discuss one such issue and how it eventually became a feature in Taxor.

Our company is registered in Karnataka, with majority of our customers based in Bangalore. As part of our expansion efforts into Kerala, we participated in SWAK Expo 2025 in Kochi & had put up a stall for promotion of our SaaS product, Martzo. After the event, we submitted the vendor invoices to claim ITC, just as we would for any other business expenses.

Knock knock - we got email from our Consultant that one of the invoices submitted was ineligible for ITC.

The problematic invoice was one related to stall fabrication and associated services at the Expo. The vendor had charged SGST & CGST and mentioned Kerala as place of supply. Given that the work was physically carried out at the expo venue in Kochi, this initially appeared reasonable.

However, GST law does not always treat the physical execution of a service as the place of supply - especially when the recipient is a registered business.

Under GST law, the nature of supply and the place of supply together determine whether a transaction is treated as an intra-state supply (attracting CGST + SGST) or an inter-state supply (attracting IGST). The place of supply is not always the physical location where the service is performed; instead, it is determined by specific rules laid down under the IGST Act.

For services such as stall fabrication and exhibition-related support services, when these are provided to a registered person, the place of supply is the location of the recipient.

In this case:

Since the supplier and place of supply were in different states, IGST should have been charged instead of CGST and SGST. Because the tax charged on the invoice did not align with this rule, the invoice became GST-non-compliant and the ITC on it was not legally claimable.

We raised this matter with the vendor and got an updated corrected invoice.

Scenarios like this happen frequently in day-to-day business transactions, where the seller of a service or product may make mistakes in the place of supply on invoices issued to a business.

Fortunately, our consultant spotted the error. In a situation with higher volumes or on a different day with a different reviewer, such mistakes could easily go unnoticed. Without structured compliance checks or proper 2B reconciliation, small errors like this can easily lead to incorrect ITC claims or silent ITC loss, often discovered only during audits.

We realized that AI could sport errors like these much more easily. If we feed in the invoice along with our company details, GST laws and compliance rules, the system can automatically detect issues like wrong place of supply, mismatched GSTINs etc and flag them. The AI could not only identify the problem but also explain to us why it matters and what needs to be corrected. The system can also learn from previous corrections, so similar errors are caught even faster in the future.

This inspired the first feature in Taxor, an Invoice Validation Check, where it verifies critical compliance information before any accounting entry is made. By catching mistakes before they reach our consultant, we now handle expenses more confidently than ever.

Stay tuned for the next post to see the other smart validations we have built to simplify compliance for all of us.