M/s. Penna Cement Industries Limited has filed an Advance Ruling application in FORM GST ARA-01 under Section 97(1) of the TGST Act, 2017 read with Rule 104 of the CGST/TGST Rules, seeking clarity on what tax should be paid on ex-factory inter-State sales made by them. 

It is stated promptly that the provisions of both the CGST Act and the TGST Act are identical, with the exception of a few provisions. As a result, unless any dissimilar clauses are specifically mentioned, a reference to the CGST Act often means a reference to the same clause under the TGST Act. In addition to the above, for the purposes of this Advance Ruling, Both the CGST Act and the TGST Act are often referred to as the GST Act.

It is noted that the applicant’s concern is covered by Section 97(2)(e) of the GST Act, and also Section 20(xviii) of the IGST Act, 2017. The Applicant included copies of challans as evidence of payment of the Advance Ruling fee of Rs. 5,000/- for SGST and Rs. 5000/- for CGST. The Applicant has declared that the issues presented in the application have not been settled by any authority or are currently pending before any authority under the GST Act. As a result, the submission is granted.

FACTS OF THE CASE:

  1. They are cement producers with two plants in Telangana; they sometimes sell cement to other states on the basis of work from their Telangana plants.
  1. According to Section 10(1)(a) of the IGST Act, 2017, the place of supply is where the transport of products ends; when they sell ex-factory from their plant, distribution ends at their factory gate, and hence CGST and SGST should be paid on those supplies.
  1. It is also stated in the same section that goods may be transported by the seller, the receiver, or any other individual and that the place of supply shall be the location of the recipient where distribution ends. Though the supply of products for ex-factory sales finishes at the factory gate, the receiver or transporter of goods is responsible for carrying the goods to the billing address state. Since delivery in such situations finishes in another state, they must charge IGST on such supplies.

ISSUE OF THE CASE:

What tax should be levied on the ex-factory inter-State supplies?

THE OFFICER’S POINT OF VIEW:

The concerned officer contended that, in view of the requirements of Sec. 10(1)(a), IGST should be paid on the supplies specified in the application.

FINDINGS OF THE CASE:

  1. The Panel said we took into account the applicant’s submissions both in their application for an advance decision and during the personal hearing. The petitioner requested an advance ruling on the taxability of ex-factory inter-State supplies. To decide the said point, the legal rules governing the imposition of IGST, CGST, and SGST must be examined.
  1. Except for the provision of alcoholic liquor for human consumption, Sec. 9(1) of the GST Act imposes CGST and SGST on all intra-State suppliers of products or services or both. In addition, Section 5(1) of the IGST Act, 2017 mandates the imposition of IGST on all interstate suppliers of products or facilities, or both, with the exception of alcoholic liquor for human consumption.
  1. The IGST Act defines ‘inter-state and ‘intrastate supplies directly in Sections 7(1), 7(2), and 8(1), 8(2), respectively. In essence, these provisions state that when the “location of the supplier” and the “place of supply” are in the same State or Union Territory, the supply is called intra-State, and when they are in different States or Union Territories, or in a State and a Union Territory, the supply is considered inter-State.
  1. Thus, whether a supply is intra-State or inter-State is determined by the location of the supply and the location of the supplier. In the present case, the claimant had no questions about the ‘location of the supplier,’ and they just wanted to understand about the ‘place of supply.’
  1. The following is a copy of the same:

Section 10 (1)- Except for goods imported into or exported from India, the place of supply of goods shall be as follows:

(a) Where the supply requires the transportation of goods, whether, by the seller, purchaser, or any other individual, the place of supply of those goods shall be the position of the goods at the time the movement of goods completes for delivery to the recipient. 

  1. According to the above clause, the location of goods at the time when transportation of goods finishes for distribution to the receiver is the place of supply in respect of goods (where supply includes movement of goods).
  1. According to the applicant, in the case of ex-factory purchases, since the distribution of products to the purchaser occurs at the factory gate as far as the seller is concerned, the place of the supplier’s factory should be considered the place of supply. However, a critical analysis of the rules of Sec. 10(1)(a) reveals that no such conclusion can be drawn. We noticed that the words “either by the supplier or by the recipient” appear after the words “where the supply includes movement of products” in the said section, implying that the movement may be carried out by the supplier, the recipient, or any other individual approved by the recipient.
  1. As a result, in accordance with Sec. 10(1)(a), the movement of goods in the case of ex-factory inter-State transactions does not end at the factory gate, but rather at the point of destination, where the goods are ultimately directed as per the billing address. It can be concluded that the place of delivery for goods involving the transportation of goods, whether by the seller, the purchaser, or any other individual approved by him, must be decided in regard to the position where the movement of goods actually ended. 

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