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

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.:

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:

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. 

• 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.

• 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. 
 

• 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.