CMA Amit Devdhe

In today’s business Bill to – ship transactions are often occurrence. The main benefit of any subsequent sale during the movement of goods is exempt from tax leads to do a proper tax planning’s in current regime.

In the Bill to – Ship to model, the billing and shipping of goods are done to entities and two states.

GST Bill to – Ship to model

For example :-

M/s. Sonu Ltd, a dealer in automobile goods, located in Maharashtra receives an order from M/s. Monu Ltd , located in Gujrat. The order is for the supply of 5,000 qty of automobile part, with an instruction to ship this goods to M/s. Natu Ltd (Customer of M/s.Monu Ltd), located in Karnataka.

There are two transactions involved in this example:-

Transaction-1 Transaction-2
Between Sonu Ltd. and Monu Ltd. :

Sonu Ltd. is the supplier and Monu Ltd. is the buyer. Accordingly, Sonu Ltd. will bill the transaction to Monu Ltd., and as per the instruction, ships the goods to Natu Ltd. in Karnataka. 

Between Monu Ltd. and Natu Ltd. :

Monu Ltd. is the supplier and Natu Ltd. is the buyer. Monu Ltd. bills the transaction to Natu Ltd., and endorses the lorry receipt (goods shipped in a lorry by Sonu Ltd.) in favour of Natu Ltd. 

Taxes:- CST 2% Taxes:- NIL
Forms:- Monu Ltd. –  C Form

Sonu Ltd. – E-1 Form

Forms:- Natu Ltd. –  C Form

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Sonu Ltd. – Lorry Receipt

In the above illustration, Sonu Ltd. bills to Monu Ltd., and ships the goods to Natu Ltd. Sonu Ltd. issues Form E1 to Monu Ltd. as against the C form produced by Monu Ltd for availing CST @ 2%. Subsequently, Monu Ltd. bills to Natu Ltd. against C Form without charging any tax, and endorses the Lorry Receipt in favour of Natu Ltd.

Bill to – Ship to transactions in Current regime

In Bill to -Ship to transactions, there is two transaction a first sale and a subsequent sale. In the current regime, tax should be levied on both parts of the transaction.

However, in order to avoid tax being calculated multiple times through the course of the transaction, exemptions are provided on subsequent sales. These exemptions however, are subject to the furnishing of the prescribed forms under CST Act. To get the exemption on the subsequent sale, a declaration Form E1 has to be issued by the first seller, and C-Form has to be issued by the buyer for levy of CST at a reduced rate of 2%.

GST-Bill to – Ship to transactions in Current regime

Bill to – Ship to transactions in GST regime

Under GST, the place of supply of goods is important to determine the transaction as interstate or intrastate and accordingly, the applicable taxes can be levied.

In GST, if the goods are supplied by the supplier to the recipient on the direction of a third person, it will be deemed that the third person has received the goods, and the place of supply will be the principal place of business of such third person.

Place of supply for Bill to – Ship to transactions is defined under GST under Section 10 (b) of IGST;

(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;

We will consider the same example in GST regime.

Bill to – Ship to transactions in GST regime

In the example, on the instruction from Monu Ltd., Sonu Ltd. ships the goods to Natu Ltd. located in Karnataka. Here, Monu Ltd. is deemed as the third person. Therefore, the place of supply will be the principal place of business of the third person i.e., Gujrat. Accordingly, Sonu Ltd. charges IGST on billing to Monu Ltd. and in second part of transaction between Monu Ltd. and Natu Ltd. will also be interstate, and IGST will be charged.

Let us discuss further with various scenarios along with understanding purpose

Supplier Bill to            (Third party) Ship to    (Recipient) Place of Supply GST
Maharashtra Maharashtra Maharashtra Maharashtra CGST+SGST
Maharashtra Karnataka Maharashtra Karnataka IGST
Maharashtra Maharashtra Karnataka Maharashtra CGST+SGST
Maharashtra Karnataka Karnataka Karnataka IGST

Considering the GST provisions, it is very important to have an accurate determination of place of supply for below reasons:

  • Wrong classification of supply between interstate or intra-state and vice-versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of CGST Act.
  • The taxpayer will have to pay the correct tax along with interest for delay on the basis of revised/correct classification.
  • Also, correct determination of place of supply will help us in knowing the incidence of tax.
  • Where wrong taxes have been paid on the basis of the wrong classification, refund will have to be claimed by the taxpayer.

Lastly, it is very important to understand first the main purpose of transaction in proposed Bill to – Ship to transactions, as it will define the place of supply under GST regime and taxes will be applicable accordingly.

Author Bio

Qualification: CMA
Company: N/A
Location: Pune, Maharashtra, IN
Member Since: 17 Jun 2017 | Total Posts: 2
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39 responses to “Bill to-Ship to Transactions and its Place of supply in GST regime”

  1. Milind says:

    BILL TO PARTY IS IN INDIA AND SHIP TO PARTY IS OUTSIDE INDIA THEN WHAT TRANSACTION IS DONE IN GST PLEASE ADVICE….
    NOTE: BILL TO PARTY SEND ORDER ALSO PAYMENT

  2. arvind says:

    what document to be attached to shipped party?

  3. anil thakur says:

    it means billed to…place of supply ( gst applicable)

  4. pradeep baghel says:

    sir, kindly tell about the lorry receipt..when supplier of state A directly supply to State c on instruction of state b

  5. TEJAS says:

    ISSUE OF BILL TO SHIP REALLY WELL ADDRESSED.

  6. Lalitha satish says:

    Supplier : Maharastra, Bill to : Karnataka, Ship to (Recipient) : Maharastra and Place of supply : Maharastra in this case is IGST or C +SGST applicable?

  7. Hardik Rokani says:

    Sir, whether we need to take GST no of Ship to Party in the GST Regime ? is it mandatory ?

  8. Gurmeet says:

    whose name Registration certificate will be issued

  9. vimal kharva says:

    we purchase material to Delhi and direct martial send to consignee address state Gujarat and our state all same as consignee,
    so what tax charge in consignee?
    igst or cgst & sgst charge to consignee ?
    please do the needful.

  10. LOCHAN says:

    Our company is registered under GST in Rajasthan and purchasing goods from registered dealer of Kolkata. And we will export that goods from kolkata port. So whether we will be liable to CGST & SGST OR IGST as dealer will send that goods directly to CHA at our order.

  11. Manmohan says:

    very good article…hope i get answer of this. IGST law permits do bill to/ ship to model within indian states other than export transtion outside India under section 10 (1)(b). further section 11 b for export to understand place of supply. now being a exporter in state ‘a’ , can instruct supplier in state ‘b’ to supply goods near custom department in state ‘c’, and using export invoice of exporter make custom clearance to supply outside of India. here want to cover 10 and 11 both section to save fright cost. please guide with natural justice

    • Milind says:

      Good Morning Sir
      thanks for reply
      in this connection we have received purchase order with charge IGST then can we charged IGST in this transaction or not?
      and if we have charge the IGST then can third party take its ITC?
      If we have not charge the IGST theb said supply can this shipment is treated as export and also said transaction shown in EXP. trans. in GSTR1?

  12. Srividya says:

    What documents should be sent with material ?
    What will be the price for invoicing of third party to consignee -will it be invoice value of consignor+GST or will it be basic price of consignor + gst

  13. CMA Sandip Shewale says:

    Good article!!

  14. Akhil Rungta says:

    sir, kindly tell about the lorry receipt..when supplier of state A directly supply to State c on instruction of state b..

  15. Deven Jhaveri says:

    How to prepare invoice for sending goods to third party after receiving instruction from party B

  16. gourav bagaria says:

    ONE SMALL DOUBT:
    supplier A from odisha gets order from B of karnataka to supply the material to orissa address itself and bill to KARNATAKA address with gstin registration of karnataka. what shall i charge cgst/sgst or igst?

    • TEJAS says:

      You will charge IGST in this case. please see the 4 scenarios mentioned above. Your case falls in 2nd scenario and hence IGST will be applicable.

  17. Sk Nausar says:

    Let assume Pary “A” from Bengal Supply and install goods to “B” at Chennai with the instraction of C carring his business also from Bengal. Then “A” bill raise to “C” CGST+SGST as per section 10(1)(b). Here is another point to be noted that there is no bill issue by C to B. assuming that it is a business expenses (Fabrication) treated by C in his accounts. Then in that case Sec 10(1)(b) applicable or 10(1)(a). Where I consider supply of goods?

  18. Pradeep Kumar Madhogaria says:

    I the Buyer do not want the original invoices to be seen by the “ship to party”. What are the documents to be carried with the transport. Can I as buyer send a scan copy of my invoice to the seller to be attached with the consignment.

  19. Karan says:

    Sir, the example were very good and the concept cleared but one query-
    1. Is the supplier liable to issue any Form, like E1 or other.

  20. Shailesh says:

    To the point explanation.

  21. Payal says:

    Excellent article.. Really helpful !!

  22. Payal says:

    Excellent article…Really helpful !!

  23. Pravin Arote says:

    Superb Article…nicely written…keep it up..

  24. Prajakta says:

    Simply explained.good one.

  25. Rucha says:

    To the point, exact and accurate article.. Too good..

  26. Shailaja says:

    Very Well Written… Keep it up..

  27. Swaraj says:

    Very good article. Explained with basics and in a very simple language. Great One !!!!

  28. Vijaya says:

    Good One

  29. narendra says:

    Well explained and simple language

  30. chandan says:

    good one

  31. Rajguru says:

    Thanks for giving brief understanding of the subject matter

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