Goods and Services Tax – Started By: – DK AGGARWAL – Dated:- 30-6-2017 Last Replied Date:- 1-7-2017 – Dear Sir Please clarify as under Ex-factory or ex-works sale – Can it be treated as intra-State supply? Now the provisions are to be analyzed to test a transaction which is popularly known as an ex-factory or ex-works sale of goods. Typically, in such transactions the supplier is responsible for making goods available at its factory site, the title, risk and possession of the goods are transferred by the supplier to the recipient at the supplier s factory gate, where after the recipient is responsible for transportation of goods up to the destination, bears the risk of any loss in transit and is free to dispose the goods in any manner it deems fit. Further, the address in the bill to field of the invoice raised by the seller would be the recipient s location, where the goods may or may not be shipped to by the buyer. While some may argue that the supply in this case does not involve m
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it can undoubtedly be said that the delivery takes place at the factory of the supplier. Now by application of Section 7(4) of the Model IGST Act, the place of supply of goods would be the factory site of the supplier. Interestingly, for the purposes of Section 7(2), termination of movement for delivery would also be the factory gate of the supplier resulting in the place of supply again being the factory site of the supplier. Thus, irrespective of the provision applied, in case of an ex-factory transaction the place of supply would be the supplier s factory, which being the same as the location of the supplier will make the transaction an intra-State supply of goods. However, this interpretation of the provisions may result in various complications and contradictions. Firstly, if an ex-factory transaction is treated as an intra-State supply subject to levy of CGST-SGST in the supplier s State, then will a recipient located in a State outside such supplier s State, without business or
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ent by the recipient himself that would be relevant for determining the place of supply. However, it is not for the supplier to be sure of whether and where the recipient chooses to move the goods as the recipient is free to move or dispose the goods in any manner in transit itself. This will result in taxability of transaction in the hands of the supplier contingent upon events not under its control. In order to avoid such uncertainties, the buyer s bill to / ship to address can be assumed to be the place where the movement of goods will eventually terminate after making necessary modifications in the agreement curtailing the buyer s right of diversion. If the address of the recipient is outside the supplier s State, then the transaction will be deemed to be an inter-State supply irrespective of the terms of supply. This view, though meritorious on account of its simplicity and objectivity, may be prone to dispute because it does not flow from an interpretation of the draft provisions
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