'Bill to - Ship to' Model under the draft India GST law

Question 1: Transaction within same state: As unless the third person registered in the same state, cannot raise Tax Invoice. If unregistered, then which State VAT Act allows third person to raise Tax Invoice.

Answer: Under scenario one, I have mentioned ‘buyer located in any state'. as such, if he is located within the state (and of course, registered), he has to raise a tax invoice on the ultimate customer. If he is located outside the state (and is therefore not registered within the state), the VAT charged by the supplier would become a cost for him. Nevertheless, since the movement of goods originates and terminates in the same state, the second leg of the transaction, (i.e. the sale effected by the buyer to the ultimate customer), would have to suffer VAT only. The ultimate customer might have to pay purchase tax, if the middleman located outside the state is unable to raise a VAT invoice on him.


Question 2: Even CST Sales Transaction shown seems incorrect. As per Supreme Court Judgement, First transaction has to be interstate.

Answer: The above question itself seems a bit ambiguous. I am not sure if by ‘transaction’ the gentleman means a sale or the movement of goods. Both are different. In an in-transit sale transaction effected under Section 6(2) of the CST Act, there is only ONE INTER-STATE MOVEMENT OF GOODS. However, before the goods reach their destination in the other state, MULTIPLE SALE TRANSACTIONS can be carried out by merely endorsing the document of title to goods and issue of C/E1/E2 forms. In my diagram, I have adopted a scenario in which there is only one sale transaction effected under Section 6(2) of the CST Act.

Question 3: Further Bill To and Ship to Flow chart depiction of transaction seems to be incorrect, as the rules stated above in article and transaction depicted in flow chart seems contrary.

Answer: The scenario which he refers to is not clear. I have discussed Bill To and Ship to transactions under existing tax regime as well as under GST. Not sure which he is referring to.

vertex vertex 19/09/2016