Complete GST lifecycle on one platform Complete GST lifecycle on one platform
Hyper-automation Hyper-automation
Smart reports & recon Smart reports & recon
Accurate filing Accurate filing

How to Determine the Place of Supply in Case of Bill to-Ship to Transactions

By Annapoorna

|

Updated on: Aug 30th, 2022

|

5 min read

The Goods and Services Tax (GST) is an indirect tax based on the consumption destination. Hence it is very important for the taxpayers to correctly determine the place of supply, especially in transactions where the billing address and the actual shipping address are different.

What is meant by bill-to-ship-to transactions?

Bill-to-ship-to transactions are a common practice in daily business. These transactions involve supplies where the goods are delivered to the recipient on the instruction of a third party. These types of transactions involve three parties, i.e.:

bill to ship to

Section 10(1)(b) of the CGST Act helps to determine the place of supply in cases of bill-to-ship-to transactions. If the supplier delivers goods to the recipient or any other person on instructions of the third party, the place of business is said to be that of the third party and not the recipient. This applies in cases where such instruction is given before or during the movement of goods but not after the movement is completed. This means that there are two supplies involved in the transaction:

bill to ship to
  1. The first part of the transaction is between the supplier and the third person, where the supplier to the third person invoices the goods.
  2. The second part of the transaction is between the third person and the ultimate recipient of the transaction, where the third person invoices to the recipient.

In both cases, CGST, SGST/UTGST, or IGST is levied to the respective recipients of both supplies depending on their places of business. The following examples show how the place of business can be determined for various scenarios.

Place of supply for various scenarios of BTST under GST

In the following examples:

  • X is the supplier of supply.
  • Y is the ultimate recipient of the supply.
  • Z is the third person on whose instruction supply is made to B.

Scenario 1:

X has their place of business in Karnataka. They are instructed by Z, who has a place of business in Maharashtra, to supply to Y, who is in Karnataka. 

bill to ship to gst
  • The place of supply for the first supply between X and Z is Maharashtra, and the second supply between Z and Y is Karnataka.
  • Since both supplies are inter-state supplies, X invoices to Z by charging IGST, and Z invoices to Y by charging IGST to Y.

Scenario 2: 

X has their place of business in Karnataka. They are instructed by Z, who has a place of business in Karnataka, to supply to Y who is in Telangana.

bill to ship to gst
  • The place of supply for the first supply between X and Z is Karnataka, and the second supply between Z and Y is Telangana.
  • Since the first supply between X and Z is an intra-state supply, X invoices to Z by charging CGST and Karnataka SGST. Since the second supply between Z and Y is an inter-state supply, Z invoices to Y by charging IGST.

Scenario 3:

X has their place of business in Karnataka. They are instructed by Z, who has a place of business in Tamil Nadu, to supply to Y, who is also in
Tamil Nadu.

bill to ship to gst
  • The place of supply for the first supply between X and Z is
    Tamil Nadu, and the second supply between Z and Y is
    Tamil Nadu.
  • Since the first supply between X and Z is an inter-state supply, X invoices to Z by charging IGST. Since the second supply between Z and Y is an intra-state supply, Z invoices to Y by charging CGST and
    Tamil Nadu SGST.

FAQs on Bill to Ship to in GST

Are services covered under the bill-to-ship-to transactions?

Bill-to-ship-to provisions also apply to services in cases where services are billed to one party but supplied to another recipient.

Does bill-to ship-to provision apply to branches of the bill-to party?

In the above examples, if Y is a branch of Z, the provisions of bill-to-ship-to transactions will still apply to this case since all branches of a person located in different states are treated as distinct persons. But if the Y is a branch functioning as an additional place of business for Z, the transaction is invoiced only to Z since both Y and Z are not distinct persons in the same state. 

How are e-Way bills issued in case of bill-to-ship-to transactions?

e-Way bill offers two sections under the place of supply: Billing-to address and Ship-to address, where the addresses of the respective parties are entered. Other invoice details are entered as per the actual invoice. Tax components (CGST, SGST/UTGST, IGST) are entered per the billing-to party’s invoice.

How is input tax credit claimed under bill-to-ship-to transactions?

Under bill-to-ship-to transactions, two different tax invoices are issued, i.e., by the seller to the third party and the third party to the ultimate recipient. The bill-to parties of both invoices will receive input tax credits. The overall impact of this transaction is that the ultimate recipient will receive the input tax credit for this supply.

How are bill-to-ship-to transactions treated under e-invoicing?

E-invoicing is done for bill-to-ship-to transactions by following the provisions under Section 10(1)(b). Two e-invoices will be raised: one by the supplier to the third party and the second by the third party to the ultimate recipient. Taxpayers will follow the same procedure while raising an e-invoice.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

Public Discussion

Get involved!

Share your thoughts!

summary-logo

Quick Summary

GST is vital for taxpayers to determine the place of supply, especially in bill-to-ship-to transactions. This involves two supplies, one between supplier and third person and the other between third person and recipient, with different GST taxation depending on locations. E-invoicing and e-way bills are applicable, providing input tax credits to all bill-to parties involved.

Was this summary helpful?
liked-feedbackliked-feedback

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption