Line Sales and its implications in GST

Summary: Line sales involve delivering goods directly to customers’ doorsteps, often used by companies to boost sales, especially in sectors like FMCG and daily consumer goods. Under GST, this approach involves specific regulations. Goods are transported under a delivery challan until sold, and if the value exceeds Rs. 50,000, an e-way bill must be generated. The e-way bill for line sales includes details such as the supply type and distance restrictions, with a maximum distance of 300 km. Upon sale, a tax invoice is issued, and unsold goods are returned to stock without financial entries. Circular 10/10/2017-GST clarifies that goods moved for approval can be transported with delivery challans and e-way bills as applicable, with inter-state supplies attracting IGST. Companies must manage these aspects carefully to ensure compliance with GST regulations and adapt to the evolving rules to maintain operational efficiency.

Introduction: In today’s competitive era, customer is the KING and companies do everything to keep the KING happy and satisfied. The companies employ various strategies to boost their sales. One such strategy to boost sales is line sales. Line sales are sales undertaken by the sellers to reach its customers at their door-steps. It is a type of push-sales wherein the seller carries its goods to the door-steps of the customers for them to buy. The customer buys the product as per their requirements. When the sales is made to the customer, the seller issues a tax invoice to the customer. This type of sale is also very popular among sale of non-alcoholic beverages, sin goods like cigarettes & pan-masala, bakery items, daily used dairy products and many others where goods are taken to small vendors and are sold at their doorsteps.

There is not much literature available on line sales and how such sales will be affected. This is a kind of sale on approval basis – wherein goods are sold after it is approved by the customers. In the GST portal, we can see the term line sales in the e-way bill portal under the outward transactions category. 

GST implications

The goods are transported to the doorsteps of the customers – without immediate sales. The risks and rewards of the goods lie with the supplier till the goods are not sold. There is also a possibility that the goods may not be sold on a particular day. Thus, till the sales are made, the ownership of such goods lie with the supplier. As the goods are under the ownership of the supplier and the goods are being transported without transfer of ownership, the goods shall be transported under the cover of delivery challan. Further, where the value of goods exceeds Rupees fifty thousand, e-way bill (EWB) shall be generated by the supplier. EWB shall be generated in following manner – 

Supply type – Outwards

Sub – type – Line sales

Document type – Delivery challan

Transaction type – Regular

Bill from – Own GSTIN

Ship from – Place of business from where the goods will be dispatched

Bill to – Self GSTIN

Ship to – Last known point where the goods will be dispatched (For instance, if the taxpayer wants to sell its product in Durgapur from Kolkata, it may enter the address of last shop in Durgapur or enter the next stoppage Asansol)

Value of goods – Value of goods (ideally should cost plus margin) as per the explanation 2 of sub–rule (1) of rule 138.

It is to be noted that when taxpayers select “Line Sales” as sub-type, the maximum distance allowed is 300 Kms. So, in a way the EWB portal restricts the movement of goods upto 300 kms only.

Treatment when goods are sold or remain unsold

When goods are sold to the customers, the supplier shall issue a tax invoice / bill of supply to the customer on a manual bill book or POS machine or any other hand-held device. Such sales invoice may be integrated with the ERP system on a real time basis or at the end of the day. The goods not sold may be brought back to the POB of the taxpayer and it shall lie in its stock, No sales to be recorded or financial entry to be made in the books of accounts. However, if the stock movement was recorded as stock-out in the ERP system, then the unsold stock shall be recorded as stock-in in the ERP system. 

The supplier shall issue B2B / B2C invoices accordingly. Where e-invoicing is applicable on the supplier, e-invoice for B2B sales shall also be generated at the end of the day and issued to the recipient accordingly. 

Departmental Clarifications

Circular 10/10/2017-GST has been issued dated 18th October, 2017 to provide clarification on issues wherein the goods are moved within the same state or from the state of registration to another state for supply on approval basis. In the circular it has been stated that that the goods which are taken for supply on approval basis can be moved from the place of business of the registered supplier to another place within the same state or to a place outside the state on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of delivery of goods. For this purpose, the person carrying the goods for such supply can carry the invoice book with him so that he can issue the invoice once the supply is fructified. Further where the supplier carries goods from one state to another and supplies them in a different state, then such supplies will be considered as inter-state supplies and attract IGST.

EWB FAQ

Query: In many cases where manufacturer or wholesaler is supplying to retailers, or where a consolidated shipment is shipped out, and then distributed to multiple consignees, the recipient is unknown at the time the goods are dispatched from shipper’s premises. A very common example is when FMCG companies send a truck out to supply kirana stores in a particular area. What needs to be done in such cases?

Ans: In such cases, movement is caused on behalf of self. No supply is being made. In such cases, delivery challan may be used for generation of e-way bills. All the provisions for delivery challan need to be followed along with the rules for e-way bills.

Line sales represent a strategic approach for companies to directly reach their customers, especially in industries like FMCG and daily consumer goods. While this method offers convenience and potential for increased sales, it also presents specific challenges under GST regulations. The proper handling of e-way bills, delivery challans, and tax invoices is crucial to ensure compliance. As businesses continue to explore innovative sales strategies, understanding the implications of line sales under GST will become increasingly important. Companies must stay informed and adapt to the evolving regulatory environment to maintain both efficiency and compliance in their operations.