Bill TO Ship TO Transactions

Bill-to-ship-to transactions are a common practice in today’s business scenario. These transactions involve supplies where goods are to be delivered to the recipient on the instruction of a third party i.e. bill to.

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

Place of supply is important to understand whether the transaction is interstate or intrastate, and accordingly, the applicable taxes can be levied.

Place of supply for bill-to-ship-to transactions

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 the movement of goods, either by way of transfer of documents of title of goods or otherwise, it shall be deemed that the said third person(Buyer-bill-to) has received the goods shall be the principal place of business of such person.

Illustration the understand the bill-to-ship-to model supplies.

In this model three persons involved namely A, B, and C

• A is a person who ordered B to supply goods to C
• B is the person who is supplying the goods directly to C on the order of A
• C is the recipient of goods.

In this complete scenario, there are two supplies involved and accordingly, two tax invoices are required to be generated.

• Invoice 1- Issued by B to A
• Invoice 2- Issued by A to C

In case of the applicability of an e-way bill for the supply of goods taking place from B to C, it can be generated by either A or B but it may be noted that only one e-way bill is required to be generated.

Also, note that both B and C can avail of ITC as per the tax invoice.