In a Bill to–Ship to transaction, three parties are typically involved. First is the buyer (referred to as the "bill-to" party) who places the order and receives the invoice. Second is the supplier, who ships the goods directly to the third party—the final recipient (known as the "ship-to" party). Although the buyer is invoiced for the goods, they are not the one receiving them. This arrangement is common in industries like retail, distribution, and manufacturing where logistics need to be streamlined. In such cases, two separate invoices are usually raised: one from the supplier to the buyer, and another from the buyer to the end customer. This model is fully compliant under GST when documented and reported correctly.
Determining place of supply in bill to–ship to transactions
As per Section 10(1)(b) of the IGST Act, the place of supply in a Bill to–Ship to transaction is the location of the buyer (the person who gives the instruction to deliver the goods). This is the case even if the goods are delivered somewhere else.
For example:
- If the supplier and buyer are in the same state, CGST and SGST are charged.
- If they are in different states, IGST is applied.
Let’s say A (based in Maharashtra) asks B (a supplier in Gujarat) to deliver goods to C (a customer in Delhi). Even though the delivery is in Delhi, the place of supply is Maharashtra, and B will charge IGST to A.
E-way bill requirements for bill to–ship to
An E-Way Bill is mandatory if the value of the goods being transported is over Rs. 50,000. Only one E-Way Bill needs to be generated for the entire transaction, even though there are two invoices.
The E-Way Bill should include:
- Part A: Invoice number, value of goods, GSTIN and addresses of both the buyer and the final recipient.
- Part B: Transporter details such as vehicle number or transporter ID.
It’s important that both billing and shipping addresses are clearly mentioned to avoid confusion or non-compliance. You can read more about Eway Bill.
Responsibility for eway bill generation
| Party | Who prepares it | Key details included |
|---|---|---|
| Supplier (B) | If they are arranging the transport | - Bill From: Supplier (B) - Dispatch From: Where goods start - Bill To: Buyer (A) - Ship To: Recipient (C) |
| Buyer (A) | If they arrange the transport | - Bill From: Buyer (A) - Dispatch From: Supplier’s location - Bill To: Customer (C) - Ship To: Customer (C) |
Only one E-Way Bill is needed per consignment. The responsibility for eway bill generation lies with the party who is managing the transportation of goods.
Input Tax Credit (ITC) implications in bill to–ship to
| Scenario | Who claims ITC | Based on |
|---|---|---|
| Supplier to Buyer (B → A) | Buyer (A) | Supplier’s invoice |
| Buyer to Recipient (A → C) | Recipient (C) | Buyer’s invoice |
In these transactions, the buyer (A) can claim Input Tax Credit even if the goods are sent directly to someone else (C). Similarly, the final recipient (C) can claim ITC based on the invoice raised by the buyer once the goods are received. However, both parties must ensure proper documentation and fulfilment of GST conditions.
Conclusion
Understanding how Bill to–Ship to transactions work under GST is important to ensure compliance with tax regulations. Correct determination of place of supply, accurate invoicing, timely eway bill generation, and proper handling of Input Tax Credit can help avoid penalties and make business operations smoother.
If you are planning to expand your business or need working capital for managing such transactions, you can consider applying for a business loan to support your financial needs.
