GST Updates

Concept of Sale in Transit in GST- Part I

This series of articles seeks to analyse the concept of Sales in Transit as envisaged in GST. In Part –I, article throws light on provisions of Section 10(1)(b) of the IGST Act, 2017 vis-a-vis Supplier, Third Party and the Recipient.

 

  1. Section 10(1)(b) of the IGST Act: Let’s try to analyse provisions of Section 10(1)(b) of the IGST Act with the help of an Example:

Case Study:

Consider an Eg. “A” in Delhi purchased goods from “B” in Mumbai. However, before the movement of the goods starts, “A” instructs “B” to dispatch goods to “C” in Chennai.

 

Lets Understand the Transaction Matrix:

The Players Role Played
B-Supplier a)     “B” delivers the goods to “C

b)     “B” delivers the goods to C by way of transfer of documents of title to the goods or otherwise.

C-Recipient a)     “C” receives the goods from “B” as per direction of A
A-Buyer i.e. third party a)      “A” gives direction to “B” to deliver goods to “C”

b)     The instruction is given to “B” before or during the movement of the goods.

 

  1. The provision can be divided into three different parts for better understanding:

 a) Part –I:-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.

The provision can be detailed out as follows:

 

Particulars Relevant Extract of the Section Implications on the Provision
Who should have made the delivery of the goods to “C” 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 The goods should have been delivered to “C” by “B” on the direction of “A”
When “B” should have acted upon  the direction of “A” to deliver the goods to “C” Before or during movement of goods “B” should act as per the direction of “A” to deliver the goods to “C” either before or during the movement of goods
How should the goods be delivered Either by way of transfer of document of title to the goods or otherwise “B” can deliver the goods to “C” as per direction of “A” by transfer of documents of title to the goods or otherwise.

 

b) Part II: Deeming fiction that goods have been received by the third party i.e. “A” although no physical/actual delivery of goods have been received by “A”

 

Particulars Relevant Extract of the Section Implications on the Provision
Goods should be deemed to have been received by the third party i.e. “A” It shall be deemed that the said third person has received the goods It shall be deemed that although the goods have been physically received by “C” but “A” has also received the goods.

 

c) Part III:-Place of supply of goods between “B” and “A” shall be the principal place of business of “A”. i.e. the place at which it would be deemed that the goods have been received by “A” would be the principal place of business of “A”.

 

Particulars Relevant Extract of the Section Implications on the Provision
Place at which it would be deemed that goods have been received by third party i.e. “A” Place of supply of such goods shall be the principal place of business of such person It shall be deemed that goods have been received by “A” at his principal place of business i.e. Gujarat

 

  1. Conclusion: Basic premise around which Section 10(1)(b) revolves around the basic premise as follows:

a) Who delivers the goods: Supplier i.e. “B”

b) To whom the goods are delivered by the supplier: Recipient or any other person i.e. “C”

c) Why the goods are delivered to the recipient by the supplier: Third party i.e. “A” gives the direction to the supplier i.e. “B” either before or during movement of goods to deliver the goods to the recipient i.e. “C”.

d) How the delivery is affected by the supplier to the recipient: Delivery is effected by way of transfer of documents of title to the goods or otherwise.

e) How “A” has received the goods: It would be deemed that “A” has received the goods.

f) Which would be the place at which it would be deemed that goods have been received by “A”: It would be deemed that “A” has received the goods at his principal place of business.

 

In the next article, we would discuss how provisions of section 10(1)(b) plays part in identifying the place of supply and location of supplier in case of various modes of Sales in transit.

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