Bill to Ship to Model

For executing a transaction of supply of goods the involvement of two persons are required, one is the supplier who supplies the goods and another is the recipient of goods who has placed the order of such goods to the supplier. However, some times the recipient gives the instruction to the supplier to deliver the goods to their customers or to their job worker or to their godown. Such types of transactions are called “Bill to Ship to transactions” where billing address is different from the address of delivery of goods. In this article we are going to discuss in details about the bill to ship to transactions, why such transactions are done and GST implications on the same like place of supply, time of supply, issue of e-waybills etc.

Let’s discuss the concept of bill to ship to with the help of an example;
XYZ of Maharashtra enters into an agreement to sell goods to ABC Enterprises of Uttar Pradesh. Meanwhile ABC Enterprises got an order from Mr. Sahil of Karnataka for the said goods. Thus ABC Enterprises had asked the XYZ to directly deliver the goods to Mr. Sahil at Karnataka.

In the above example the supply between XYZ (Maharashtra) and ABC (U.P) is a bill to ship to supply where the goods are delivered by the supplier [XYZ] to a recipient [Sahil (Karnataka)] or any other person on the direction of a third person [ABC Enterprises].

Accordingly, in bill to ship to transactions there is an involvement of three parties. Such types of transaction are very common in now a days. The main reason why the companies are willing to execute such types of bill to ship to transaction, is to save the cost of transportation of goods. Like in above example if ABC Enterprises does not instruct their supplier (XYZ) to directly deliver the said goods to Mr. Sahil, then first the goods are moved from the place of business of XYZ to ABC Enterprises and than again the same goods have to be moved from ABC Enterprises to the location of customer Mr. Sahil. Hence the transportation cost can be saved upto some extent, by applying the bill to ship to concept.

GST implications on Bill to Ship to Transactions:
Whenever any bill to ship to transaction is done there are many questions that comes in mind in relation to GST and these are as follows;
1. How the supplier of goods would issue a tax invoice for such transaction?
2. Whether CGST/SGST or IGST would be applicable for such transaction?
3. Who would be eligible to claim ITC of such goods?
4. How to generate E-way bill for such transaction?

Let us discuss the above questions one by one;
1. How the supplier of goods would issue a tax invoice for such transaction?

The provisions relating to issuance of tax invoices are contained in section 31 of CGST Act 2017 and Rule 46 of CGST Rules 2017. Rule 46 prescribes the particulars that have to be mentioned in the tax invoices issued u/s 31 of CGST Act 2017. As per clause (d) of Rule 46, the tax invoice should have the
name, address and GSTIN of the recipient and as per clause (o) of Rule 46 the tax invoice should also contain the address of delivery where the same is different from the place of supply.

In case of bill to ship to transactions the billing address is different from the address of delivery of goods. Thus, the supplier in case of bill to ship to transactions should mention two types of details, one is related to Bill to party to whom the billing is done and the another details should pertains to ship to party to whom the delivery of goods is to be done. In other words, tax invoice should have name, address & GSTIN of bill to party and similarly, the name, address & GSTIN of ship to party should also mentioned in the tax invoice.

In addition to the above as per Rule 46((n) the place of supply should also mentioned on the tax invoice. Now the next question that arises here is what should be the place of supply in case of Bill to Ship to transactions? The place of supply in case of bill to ship to transactions are to be determined as per clause (b) of subsection 1 of section 10 of IGST Act 2017 which states that;

“(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”

Thus in case of bill to ship to transaction the person who has given the direction to deliver the goods at another location it shall be deemed that said person has received the goods and place of supply would be the location of such person. In our example the goods are delivered by the supplier [XYZ] to a recipient [Sahil (Karnataka)] on the direction of a third person [ABC Enterprises]. Thus it shall be deemed that ABC Enterprises has received the goods. Accordingly, the place of supply in our example would be the location of ABC Enterprises i.e., Uttar Pradesh.

2. For the second question regarding the type of tax to be charged in the tax invoice. The question whether IGST has to be charged in the tax invoice or CGST/SGST has to be charged, it depends whether the transaction is inter state supply or intra state supply.

As per section 7 of IGST Act 2017 where the location of the supplier and the place of supply of goods are in the different state or different Union territory shall be treated as intra-State supply. Further as per section 8 of IGST Act 2017 where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply.

As discussed above, the place of supply in case of bill to ship to transaction would be the location of bill to party. Accordingly, if the location of supplier and place of supply are in same states then it would be treated as intra state supply and CGST/SGST would be applicable. But if the location of supplier and place of supply are in different states then IGST would be applicable being an inter state supply. Thus in our example as the location of supplier (XYZ) is of Maharashtra and place of supply (as discussed above) is Uttar Pradesh, hence IGST would be applicable in this case. Accordingly tax invoice would be issued by charging IGST in it.

3. Who would be eligible to claim ITC of such goods?
As per section 16(2)(b) no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless he has received the goods or services or both. An explanation given under section 16(2)(b) is as follows;

“Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services-
(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.”

From the clause (b) of section 16 of CGST Act 2017, it is clear that the person who has received the goods would be eligible to claim ITC. However as per explanation it shall be deemed that goods have been received by the registered person where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person.

Thus in case of Bill to Ship to Model, the ITC would be eligible to the registered person who has given the direction to deliver such goods to another person. Accordingly, in our example the ABC Enterprises would be eligible to claim the ITC, even if the goods are delivered to Mr. Sahil.

4. How to generate E-way bill for such transaction?
The E-way bill in case of bill to ship to transaction is to be generated by selecting transaction type as “Bill to Ship to” and in Bill to column of E-way bill, the details of billing address as mentioned in the tax invoice has to be filled and in ship to column of E-way bill the shipping details of person to whom delivery is being made has to be shown.

Till now we have obtained knowledge about bill to ship to transactions in case where both the supplier & recipient are registered under GST i.e., B2B supply. Now the question arises here is what would be the situation where the transaction is B2C supply i.e., the supplier is registered and the recipient is unregistered.

In this regard it is important to know that the provisions related place of supply of goods to unregistered person are contained in section 10(1)(ca) of IGST Act 2017 which states that;

“(ca) where the supply of goods is made to a person other than a registered person, the place of supply shall, notwithstanding anything contrary contained in clause (a) or clause (c), be the location as per the address of the said person recorded in the invoice issued in respect of the said supply and the location of the supplier where the address of the said person is not recorded in the invoice.
Explanation.-For the purposes of this clause, recording of the name of the State of the said person in the invoice shall be deemed to be the recording of the address of the said person”
Thus as per section 10(1)(ca) where the supply of goods is made to an unregistered person, the place of supply would be the location as per the address of the said un registered person and the location of the supplier if the address of the said person is not recorded in the invoice.

In this respect the CBIC has also issued Circular No. 209/3/2024-GST to clarify that in case of supply of goods made to an unregistered person where billing address is different from the address of delivery of goods the place of supply would be the location where such goods are delivered.

From the above detailed discussions of Bill to Ship to transactions under GST. Now let’s move towards the conclusion of the same.

Conclusion; In case of B2B supply of goods the place of supply of bill to ship to transactions would be the location of bill to party. However, in case of B2C supply of goods the place of supply would be the address of delivery of goods.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.