The issue involved in this case that whether M/s Uma Polymers Ltd. Guwahati was liable to charge CGST & SGST, Guwahati instead of IGST? Moreover whether appellant is entitled for availing the credit of IGST charged by M/S Uma polymers Ltd., Guwahati in

PJ/Case Study/2018-19/137

01 December 2018

ADVANCE RULING NO.RAJ/AAR/2018-19/23 dt.02.11.2018
Prepared by CA Preksha jain and Himanshu Bhimani

Introduction:-The compendious of the case is that, M/S. Uma Polymers Ltd. (hereinafter referred to as the appellant) is engaged in manufacture of Plastic Pouches in Jodhpur having GSTIN registration Number 08AAACU0748E1ZJ. The appellant proposes to purchase goods form M/s Uma Polymers Ltd., Guwahati and will further supply the said goods to M/s Pratap Snacks Ltd., Guwahati. The appellant will direct M/s Uma Polymers Ltd., Guwahati to deliver the goods to M/s Pratap Snacks Ltd., Guwahati. The appellant sought to seek advance ruling on the place of supply in case of bill to/ ship to transactions.

Relevant Legal Provisions:

Section 17(1) of CGST Act,2017
Section 16 of CGST Act,2017
Section 10(1)(b) of IGST Act, 2017

Issue Involved: The issue involved in this case that whether M/s Uma Polymers Ltd. Guwahati was liable to charge CGST & SGST, Guwahati instead of IGST?
Moreover whether appellant is entitled for availing the credit of IGST charged by M/S Uma polymers Ltd., Guwahati in case of bill to/ship to model?

Assessee’s Contention:

The present application for advance ruling has been filed to determine the tax liability on the supply of goods by the applicant to M/s Pratap Snacks Ltd., Guwahati on the directions of M/s Umax Packaging-A unit of Uma Polymers Ltd., Jodhpur. The applicant is not clear whether they are liable to pay IGST or are required to discharge CGST and SGST Guwahati on the supply of goods to M/s Umax Packaging-A unit of Uma Polymers Ltd. with place of delivery as M/s Pratap Snacks Ltd., Guwahati. The applicant is unable to determine the tax liability required to be discharged by them as if they pay tax under wrong head, they will be compelled to pay tax under the correct head with the only option to claim refund of tax paid under wrong head which would involve lot of procedural formalities.
The applicant submits that in order to determine the correct head of tax, it is pertinent to refer the provisions contained in section 10 of the IGST Act, 2017. The relevant provisions are produced for the sake of convenient reference as follows:-

10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––
(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;
(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;
(c) where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;
(d) where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;
(e) where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.
(2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.
The applicant submits that the applicability of particular sub-clause of the above section will determine the liability of GST. The applicant hereby discusses the applicability of the above sub-clauses one by one in order to reach to the correct conclusion.

As regards provision contained in section 10(1)(a) is concerned, we submit that it states that where supply involve movement of goods, irrespective of the fact that who causes movement of goods, the place of supply will be location of goods at the time at which movement of goods terminates for delivery to the recipeint. However, it is being opined that this provision is applicable only where ‘bill to’ and ‘ship to’ parties are the same and does not covers third person which is being covered in section 10(1)(b). Consequently, in the present case, involving three persons, the provision contained in section 10(1)(b) needs to be examined.

According to the provision contained in section 10(1)(b) of the IGST Act, 2017, where the goods are delivered by the supplier (person dispatching goods) to a recipient on the direction of a third person, 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. Before analysing the above provision, it is pertinent to refer to the definitions of supplier and recipeint as given in section 2 of the CGST Act, 2017 as follows:-
(93) “recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;

(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;

The applicant submits that the definition of recipeint clearly states that where consideration is payable for supply of goods, person liable to pay consideration is the recipeint. In the present case, consideration is payable to M/s Uma Polymers Ltd. by M/s Umax Packaging-A unit of Uma Polymers Ltd. and so the receiver is M/s Umax Packaging-A unit of Uma Polymers Ltd. Moreover, as per Explanation to section 16(2) of the CGST Act, 2017, a deeming fiction is created so as to presume that the recipient paying consideration has received the goods so as to ensure that there is no leakage of credit. Consequently, the place of supply should be aptly governed by the provision contained in section 10(1)(b) of the IGST Act, 2017 and the place of supply should be the principal place of business of the person who had directed the goods to be delivered to a different location. Therefore, the place of supply is in Jodhpur (Rajasthan) whereas the supplier is situated in Guwahati, by applying the provision contained in section 10(1)(b) of the IGST Act, 2017. Hence, the applicant should charge IGST from Umax Packaging-A unit of Uma Polymers Ltd., Jodhpur. However, the applicant does not want to take any risk of interpretation of the provision and requests to kindly give guidance regarding nature of tax payable by them.

It is also worth noting that the government has issued clarifications on various issues in GST by way of tweets and FAQs. In case of ‘bill to’ ‘ship to’ model, it has been clarified by the government that the place of supply shall be the ‘bill to’ location. The applicant hereby produces the extract from the recent FAQ released by the government for the sake of convenient reference as follows:-

How to handle “Bill to” - “Ship to” invoice in e-way bill system?
Sometimes, the tax payer raises the bill to somebody and sends the consignment to somebody else as per the business requirements. There is a provision in the e-way bill system to handle this situation, called as ‘Bill to’ and ‘Ship to’.
In the e-way bill form, there are two portions under ‘TO’ section. In the left hand side - ‘Billing To’ GSTIN and trade name is entered and in the right hand side - ‘Ship to’ address of the destination of the movement is entered. The other details are entered as per the invoice.
In case ship to state is different from Bill to State, the tax components are entered as per the billing state party. That is, if the Bill to location is inter-state for the supplier, IGST is entered and if the Bill to Party location is intra-state for the supplier, the SGST and CGST are entered irrespective of movement of goods whether movement happened within state or outside the state.
The above clarification clearly indicates that in case of ‘bill to’ ‘ship to’ model, the place of supply is determined according to the bill to location of the party. In the present case, since the bill to party is M/s Umax Packaging-A unit of Uma Polymers Ltd., Jodhpur located in Rajasthan while the supplier is the applicant from Guwahati, IGST should be charged. Therefore, the applicant requests to pronounce the decision regarding nature of tax to be charged from M/s Umax Packaging- A unit of Uma Polymers Ltd., Jodhpur so that any dispute is avoided in future.

Conclusion:- Hence the advance ruling authority concluded that M/s Uma Polymers Ltd., Guwahati has to charge IGST instead of CGST & SGST, Guwahati . The appellant can take credit of such IGST and can further charge IGST form M/s Pratap Snacks Ltd., Guwahati.

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PJ/Case Study/2018-19/137
01 December 2018

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