GST Update on Circular No. 61/2018-GST dated 04.09.2018

This circular has been issued by the government in order to clarify on certain issues pertaining to E-way bill in case of storing of goods in godown of transporter as prescribed in the Circular No. 61/2018-GST dated 04.09.2018. This circular is being issued for small textile trader or processors who purchase the material but do not take delivery as there is scarcity of space in their premises. They keep the same in the godown of transporter. Later on, whenever the material is required then they take the delivery from the godown itself. But this practice was not allowed as per GST law. Hence they have sought the clarification from the CBIC.
The Government had received many representations for clarifications regarding the compliance of E Way Bill procedures if the goods are stored at the transporter’s godown on temporary basis. In this regard, the government has clarified that in case where consignee/ recipient taxpayer stores his goods in the godown of the transporter, then the transporter’s godown has to be declared as an additional place of business by the recipient taxpayer. The above interpretation has been adopted on the grounds of Section 2(85) of the CGST Act that defines the “place of business” to include “a place from where the business is ordinarily carried out, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both”.
An additional place of business is the place of business from where taxpayer carries out business related activities within the state, in addition to the principal place of business. In our case since the recipient taxpayer is storing their goods in the godown of the transporter in the same city, hence this godown has to be declared as an additional place of business by the recipient.
The supplier of goods will send the goods to this small tax payer and will declare the godown of tax payer as destination as it is declared as additional place of business. The delivery will be concluded as and when it reaches the godown of transporter. Further, whenever the goods are taken from the transporters’ godown to the place of this small assessee, then challan for movement of goods from one premises of taxpayer to another godown of taxpayer along with e-way bill will be issued. The recipient taxpayer is also required to maintain records as per rules 56 and 57 of the CGST Rules at this godown also. However, the transporter is not required to follow any additional compliance requirements apart from those prescribed. But the problem comes when a number of such small traders have declared this premises as additional place of business. All these have to maintain records at same place. This does not seem to be feasible.
It is clarified in this circular that the above provisions would apply mutatis mutandis in the case where the supplier of the goods and the transporter are located within the same state.

But we have come across another situation like this only. In such situation, prior to introduction of GST, the factory owner used to send the unsold material to various locations in other states. This unsold material was kept with transporter. The agent of factory is told about same. Whenever the material was sold, the delivery was taken from transporter and handed over to purchaser. The bill was raised by factory owner afterwards.
This situation does not fit into the same. As the additional place of business can be added in the same state, but it is normally outside the state. Hence, a separate registration is to be taken and this will act as depot of factory.
As per Section 25 of CGST Act, 2017 which reads as follows:
(2) A person seeking registration under this Act shall be granted a single registration in a State or Union territory: Provided that a person having multiple business verticals in a State or Union territory may be granted a separate registration for each business vertical, subject to such conditions as may be prescribed.
Thus, on the basis of the interpretation of the above provision it can be concluded that the supplier is required to obtain a separate registration in a state for every state that he wishes to declare as an additional place of business. However, it is impracticable for the supplier to obtain separate registration for each and every state where the warehouse of the transporter of goods is located.
But taking registration of transporter godown is big task as ownership document or rent deed agreement is required. Moreover, a number of factory owners used to keep their material with the same transporter but it is not feasible to take registration of same premises by number of persons. Hence, this practice has stopped and factory owner supplies the goods to specific clients only.
The government required to consider the cases where the unsold goods are kept by the supplier at the transporter’s godown in other state for further sale. It would be difficult for the supplier to abide by the compliance requirements of the law as this would lead to a substantial increase in the compliance costs.
Hence, the government is required to issue further clarifications on these matters.

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GST Update on Circular No. 61/2018-GST dated 04.09.2018

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