Page 6 - Ch_10 ITC

CCP 10.02.05.00

One of the conditions to claim input tax credit is that the receiver must have received the goods. Is there
any provision for deemed receipt of goods in case of transfer of document of title before or during the
movement of goods? would your answer be different in case supply of services?
Answer:
a) As per Explanation to Section 16(2)(b) of CGST Act, goods or services are deemed to be received by

registered person under “Bill to Ship to” Model in following cases:-
i) Where goods are delivered by supplier to recipient or any other person on direction of such registered
person, whether acting as an agent or otherwise, before or during movement of goods, either by way of
transfer of documents of title to goods or otherwise.

ii) Where services are provided by supplier to any person on the direction of and on account of such
registered person.
b) No, answer will be the same as stated above, because section 16(2)(b) is applicable in case of supply of
services also.

CCP 10.02.06.00
M/s Diwan & Sons of New Delhi, has placed an order for 250 kg of plastic granules @ ₹50 per kg
(exclusive of GST) on M/s Karim & Bros. of Noida, U.P. M/s Karim & Bros. has agreed to deliver the

goods at the warehouse of M/s Diwan & Sons at New Delhi. While the order was getting packed at the
factory of M/s Karim & Bros., M/s Diwan & Sons got an order from Shubhkamna Sales of Hapur, U.P.
for 250 kg of plastic granules @ ₹60 per kg (exclusive of GST). In order to save on transportation cost,
M/s Diwan & Sons asks M/s Karim & Bros. to directly deliver the plastic granules to Shubhkamna
Sales at its godown located in Hapur. Accordingly, M/s Karim & Bros. has delivered the plastic

granules at the godown of Shubhkamna Sales at Hapur. Examine the availability of ITC with M/s
Diwan & Sons & M/s Karim & Bros.
Note:- All the parties are registered under GST and rate of GST is 18%. [Study Mat]

Answer:
Legal Provision:-
Ü As per section 16(2)(b) of CGST Act, a registered person can avail ITC of tax paid on supply only when the
goods &/or services are received by him.
Ü However, goods delivered to a third person on direction of registered person by transfer of documents of

title or otherwise, either before or during the movement, are deemed to have been received by such
registered person.
Ü So, ITC is available to the registered person, on whose order the goods are delivered to a third person even
though the registered person does not receive the goods.

Discussion & Conclusion:-
Ü In given case, goods have been delivered by M/s Karim & Bros. (supplier) to Shubhkamna Sales (third
person) on the direction of M/s Diwan & Sons (registered person).
Ü Therefore, ITC of ` 2,250 (` 50 x 250 x 18%) will be available to M/s Diwan & Sons (registered person) on

purchase of 250 kg of plastic granules @50 per kg.
Ü Further, there is another supply between Diwan & Sons (supplier) & Shubhkamna Sales (recipient).
Ü Therefore, Shubhkamna Sales can avail ITC of ` 2,700 (` 60 x 250 x 18%) on purchase of 250 kg of plastic
granules @60 per kg.

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