Where did you read about \G? perlre says " \G Match only at pos() (e.g. at the end-of-match position of prior m//g)" and that's what happens. After the first two matches, pos points at the letter X, and X is not a space, so the match fails.

my @lines = q[                X        Y];
foreach(@lines){
  s/\G {8}/warn pos();'G'/ge;
}
die qq['],@lines,q['];
__END__
0 at - line 3.
8 at - line 3.
'GGX        Y' at - line 5.
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I can only assume that the first time it encounters a line, \G is set to 0 - i.e. the beginning of the line. Is this the case?

You don't have to assume, just use re 'debug'; and watch the output fly.