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Place of supply of goods clarification under gst

Subramanya (Tax Consultant)     21 October 2016

Tax Consultant 
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Place of Supply of Goods Clarification

Mr. A of Karnataka raised an invoice to Mr. B of Karnataka. However, Mr. B directed to deliver the goods to Mr. C who is registerd under GST in Kerala. 

As per model law, Place of supply will be consumption state i.e, Kerala

Whether to charge IGST in the invoice?


Sunil Kumar

Sunil Kumar (Indirect Taxation )     24 October 2016

Sunil Kumar
Indirect Taxation  
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HI Subramanya,

In this case CGST and SGST are requires to charge, as transaction between Mr.A and Mr.B is Intra State Supply.

The section 3A of Draft IGST Act says the transaction shall be called as Intra State Supply if the location of the supplier and the place of supply are in the same State.

Further, sub-section (2A) of section 5 of Draft IGST dealing with the place of supply of goods says:

  • 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 the movement of goods,
  • either by 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.

Therefore when there is transaction between three persons, wherein the buyer directs the supplier to send goods to someone else (who may be in a same State or other State), the location of the person who gives direction for delivery (i.e. Mr. B), his place of business shall be the place of supply and it shall be deemed that he (i.e. Mr. B) has received the goods.

It is further need to note that when Mr. B Invoices to Mr. C then IGST would require to charge. The sub-section (3) of section 5 of the IGST Act would be applicable in this case. The provision says

  • When the supply does not involve movement of goods,
  • whether by the supplier or the recipient,
  • the place of supply be the location of such goods at the time of the delivery to the recipient.

Once the goods are delivered by Mr. A to Mr. C it would not require any further movement between Mr. B and Mr. C, the place of supply shall be the location of such goods i.e. location of Mr. C in our case at the time of delivery to the recipient. Since, the location of Mr. B and the place of supply are not in same State, therefore the transaction would be treated as Interstate supply (Section 3 of Draft IGST Act).


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Madhukar N Hiregange

Madhukar N Hiregange (Chartered Accountant)     24 October 2016

Madhukar N Hiregange
Chartered Accountant 
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This transaction can be compared to a Bill to ship to transaction or E1/ E2 sale presenlty. Important aspects is who is liable to pay for the goods. If C is liable to pay for the goods to B and B is liable to pay for the goods to A then: 

In the question the supplier is A - no confusion

The recipeint is C ( person liable to pay the consideration ( 2(80) to B)

Third person is B - who directs that goods are to be delivered to C.

Therefore under Sec. 5 (2A) the principla place of business of third person would be the deemed place of supply.

Consequently there would be 2 transactions. A will invoice B CGST & SGST.( deemed basis)  B will avail the credit and invoice C IGST for subsequent supply. Here we may note that the value addition by B would alsobe captured- which is the intention. In the earlier CST Section 6 the second transaction was exempt.  

There seems to be some amount of lack of clarity. Hopefully the GST Circular will clarify this issue. 

The place of supply of goods should be read along with the location of the thrid person is what I understood.


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Vishal (senior accountant)     14 April 2017

senior accountant 
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but my query is what is the effect on E1 sale transaction

D ARUNA KUMAR (Manager Finance)     11 July 2017

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Madhukar Sir

Most of the manufacturers are not directly selling the goods, They asked to purchse through their dealers. Here Manufacturer and dealers have their own GST numbers. In the above case B is directed A (A and B in same state) to supply the goods to C who is registered dealer in Kerala. What I understood is A  raise the invoice to B charging cgst and sgst and B invocing to C charging IGST. Sir please clarify IS IT CORRECT.

Jayesh Doshi

Jayesh Doshi (Self)     13 July 2017

Jayesh Doshi
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A of Rajasthan comes to Delhi. Bought some goods from the office of B of Delhi. B delivers the goods to A at his office in Delhi then finally A take the goods with him at his place of business i.e. Rajasthan. In such case What tax A will charge to B ? Is it SGST & CGST as delivery given at his office i.e Delhi or IGST as A take the goods with him at billing address which is Rajasthan following the consumption or destination base tax concept under gst ?

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