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NATURE (IGST OR CGST+SGST)

Devansh Jain (...) (1269 Points)

28 June 2017

Nature of following transaction:

Mr. Y of Y ltd. (Mumbai) comes to Delhi.
X ltd (Delhi) makes ex-factory sales of goods to Mr. Y & cuts invoice in name of Y ltd. Mr. Y then takes these goods to Mumbai to re-sale.

Would it be intra-state sale as destination (place of supply) is Delhi only {movement by seller}
Or
Would it be inter-state sale as destination (place of supply) is Mumbai {movement by recipient}

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9 Replies

Umesh V Naig (Statutory Analyst) (452 Points)
Replied 28 June 2017

yes , under GST when billed by Delhi to Mumbai IGST charged.

when Mumbai sells to Mumbai CGST+SGST is charged and adjusted against IGST.

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Tarak Shah (Chartered Accoutants) (105 Points)
Replied 28 June 2017

As per Chaper V of IGST and Sec 2 (86) of CGST place of supply of goods other than supply of goods imported into or exported out of India, shall be :

a) where the supply involves MOVEMET OF GOODS, whether by supplier or a receipient or by any other person, the POS (Place of Supply) shall be the location of goods at the time at which the movement of goods terminates for deliver to the receipient; in this case MOVEMENT OF GOODS is relevant one.

c) Where the supply does not invlove movement of goods, whether by supplier of the receipeint, the palce of supply shall be the location of such goods at the time of delivery of goods.

In your given case as per clause (a) above movement of goods terminates at Delhi itself as it is ex-factory sale. Address of delivery is also mentioned in the Invoice as "DELHI", it is treated as Intrastate Sale and SCGT+CGST to be paid on such a transaction.

But if Insurance and freight paid by Delhi Supplier and Delivery address is mentioned on the face of the invoice is of "Mumbai" it is treated as Interstate sale and IGST + CGST is to be paid on such a transaction.

NB : This reply is based on my knowledge and belief based on the plain reading of the GST Act, pl. consult your CA or Tax consultant before act based on the reply. There may of chance of further debate on such a query if scenerio change.

Devansh Jain (...) (1269 Points)
Replied 28 June 2017

But sir, As per section 7 and section 8 of the IGST Act, nature depends upon 2 factors: 'location of supplier' and 'place of supply'.

Could you please justify your answer of billing address basis with any section/rule/notification?

Devansh Jain (...) (1269 Points)
Replied 28 June 2017

Thank you for your reply Mr. Tarak.

I wanted to precisely frame my question as "over-the-counter-sale" instead of "ex-factory". I would be glad if you could share any reference for the point of insurance & freight charges as you said..(if it is not your own interpretation)

Umesh V Naig (Statutory Analyst) (452 Points)
Replied 28 June 2017

when mumbai buyer purchases at Delhi , he would have given mumbai GSTN no only..hence IGST charged.Then Mumbai

buyer can take IGST and sell in mumbai as local sales with SGST+CGST as per rates and adjust

where is the confusion.

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Umesh V Naig (Statutory Analyst) (452 Points)
Replied 28 June 2017

But if you still say the mumbai buyer is considering himself as local buyer he should still give his GSTN no...if there is no GSTN then

it is under RCM and the seller has to pay as unregistered dealer tax

Tarak Shah (Chartered Accoutants) (105 Points)
Replied 28 June 2017

As per Section 7 of IGST Act (Inter State Supply), where the location of the supplier and place of supply are in "

a) two different state

b) two diffrent UT

c) a state and UT

shall be treated as a supply of goods in the course of interstate trade or commerce.

In your case supply of goods is at Delhi, as it is a exfactory sale it means deliery terminates in Delhi itself.

As per Sec-8 of IGST, supply of goods where the location of the supplier and the place of supply are in the same state or same UT shall be treaed as Intrastate supply.

Your query falls in sec-8 of IGST where location of supplier is at Delhi and place of supply is at Delhi being a exfactory sale without Insurance and frieght being borne by supplier of Delhi. Even the Delhi supllier, mentions Place of delivery as 'EXFACTORY" and not at Mumbai, if on the face of Invoice "Mumbai" is mentioned then it is clear case of Interstate sale. But it depends on the Terms of contract (Purchase order).

It nutshell in such type of transaction, PO terms is the only evidence which can support your argument.

Hope I have tride to justify your query.

Umesh V Naig (Statutory Analyst) (452 Points)
Replied 28 June 2017

It is to be understood like this what a buyer wants on his bill copy either in Delhi address or Mumbai address , ex factory is a commercial term but legally the transaction terminates as per the invoice declaration address , destination etc

then there will be settle of law taxes as per above answer

Devansh Jain (...) (1269 Points)
Replied 28 June 2017

Thank you Tarak Shah. only Your answer seems satisfactory!

(In a nut-shell If I am a small shop owner who doesn't knows PO etc. and I go to Mumbai to purchase clothes on my own and I come back to Delhi to sell those here then I will not be able to utilize SGST mumbai agaist SGST Delhi. GST is totally against dozens of traders like me!!)