GST- Taxability of Goods delivered to other State on direction of Buyer

By | March 1, 2017
(Last Updated On: March 1, 2017)

Taxability of  Goods delivered to other State on direction of Buyer

Example – Goods Purchased from One state – Buyer in second State- Recipient in Third State

Mr A of Delhi Purchased Goods from E commerce website (say www. Shopper.com based in Mumbai)

Mr A has given the instructions to Bill to him (Delhi) but Ship/ deliver Goods to his friend in Punjab.

Issue : What will be Place of Supply ? Whether it will be Delhi or Punjab ?

Place of Supply will be Delhi  as per Section 7(3) of Draft IGST Law

The provisos relating to Place of supply in relation to goods are provided under section 7 of Draft IGST Law and. Sub-section (3) of the Section 7 covers the above situation and same is reproduced hereunder:

    –  Where the goods are delivered by the supplier to a recipient or any other person,

    –  on the direction of a third person (Buyer),

    –  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.(Third person/Buyer)

Type of Tax to be collected under GST

As per Section 5 of the Draft IGST Law and  if the transaction is Inter State supply then IGST (INTEGRATED GOODS AND SERVICES TAX ACT)  is levied. As per Section 3 (1) of Draft IGST Law and, the transaction is said to be Inter State supply  where the location of the supplier and the place of supply are in different States.  Since in the above case, the location of supplier is in Mumbai and the place of supply is in Delhi, thus, IGST will be levied.

Relevant Section 3 of Draft IGST Law

3. Supplies of goods and/or services in the course of inter-State trade or commerce 

(1) Subject to the provisions of section 7, supply of goods in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States.

(2) Subject to the provisions of section 9, supply of services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States.

(3) Supply of goods in the course of import into the territory of India till they cross the customs frontiers of India shall be deemed to be a supply of goods in the course of inter-State trade or commerce.

(4) Supply of services in the course of import into the territory of India shall be deemed to be a supply of services in the course of inter-State trade or commerce.

(5) Supply of goods and/or services, when the supplier is located in India and the place of supply is outside India, shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

(6) Supply of goods and/ or services to or by a SEZ developer or an SEZ unit, shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

(7) Any supply of goods and/or services in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

Relevant Section 7 of Draft IGST Law

7. Place of supply of goods other than supply of goods imported into, or exported from India 

(1) The provisions of this section shall apply to determine the place of supply of goods other than supply of goods imported into, or exported from India.

(2) Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

(3) 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.

(4) Where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient.

(5) Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly.

(6) Where the goods are supplied on board a conveyance, such as a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

(7) Where the place of supply of goods cannot be determined in terms of subsection (2), (3), (4), (5) or (6), the same shall be determined in a manner prescribed by the Central Government on the recommendation of the Council.

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