Statutory Provision - IGST Act
10(1)(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;
The essential ingredients of the provisions of clause (b) of section 10(1) are-
(a) The goods shall be delivered to recipient or any other person
(b) The goods shall be delivered on the direction of 3rd person who may be an agent
(c) The goods directed to be delivered during movement of goods either by way of transfer of documents of title to the goods or otherwise.
In such case, even if the goods are delivered to any person, as per the provisions of clause (b) of section 10(1), the place of supply shall be deemed to be office of the person who has directed to deliver such goods. Thus, place of termination of movement of goods will not be the place of supply when the goods have been delivered on the directions of 3rd person. The place of supply will be location of 3rd person.
This can be explained by an example. Say M/s X company in Mumbai place order on M/s Y in Mumbai for delivery of 100 kgs of A material. M/s X company directs M/s Y to deliver the goods to M/s Z in Gujarat. M/s Y in Mumbai arranges for transportation of goods to M/s Z in Gujarat. The delivery of goods takes place in Gujarat. However, as per clause (b), M/s X in Mumbai under whose direction the goods have been delivered will be considered as recipient of goods and the place of supply would be in Mumbai.
It appears that the 3rd person under whose direction goods are delivered shall be considered as recipient of goods. It further provides that place of supply will be location of M/s X even if M/s X acts as agent of certain principal.
Levy of tax is different than in existing Central Sales Tax Act
Section 3 of the Central Sales Tax Act makes provision for levy of tax when sale or purchase of goods takes place in the course of inter-state trade or commerce. Section 3 reads as follows:-
A sale or purchase of goods shall be deemed to take place in the course of inter-state trade or commerce if the sale or purchase-
(a) Occasions the movement of goods from one State to another; or
(b) Is effected by a transfer of documents of title to the goods during their movement from one State to another.
Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purpose of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
Explanation 2.-Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of the goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.
Central Sales Tax is leviable when, in pursuance of a contract, the goods are moved from one State to another or where sale is effected by transfer of document to title. Thus the emphasis is in movement of goods from one State to another. But as per the provision contained in clause (b) the emphasis is on recipient of goods and not on movement of goods. Thus Central Sales Tax was payable when movement of goods took place between two states. Under GST, IGST will be payable as per clause (b) to section 10(1) when third person (under whose direction goods are delivered) is located outside the State in which the supplier is located. Thus in the example given above, the movement of goods takes place from Mumbai to Gujarat in pursuance of order placed by M/s X on M/s Y. But as per the provision contained in clause (b) of section
10(1). The place of supply is Maharashtra as Mr. X is located in Maharashtra. Therefore, IGST should not be payable. The local CGST and SGST will be payable.
For explanation with example see this attached video