AAR rules ex-factory inter-State supplies attract IGST under Section 10(1)(a) when recipient arranges transportation

AAR ruled that ex-factory inter-State supplies attract IGST. The authority determined that when goods are made available at factory gate but recipient arranges transportation to another state, the place of supply is the destination state under Section 10(1)(a). Since supplier's location and place of supply are in different states, the transaction qualifies as inter-State supply, making the supplier liable to charge IGST on such ex-factory supplies.

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Issues:
Determining the tax to be charged on ex-factory inter-State sales.

Analysis:
The applicant, a cement manufacturer, sought an advance ruling to clarify the tax to be charged on their ex-factory inter-State sales. The key issue revolved around whether CGST and SGST or IGST should be levied on such transactions. The applicant contended that since the delivery of goods terminates at their factory gate, CGST and SGST should apply. However, the concerned officer argued that as per Sec. 10(1)(a) of the IGST Act, IGST should be charged for such supplies. The Authority for Advance Rulings analyzed the legal provisions under the GST Act and the IGST Act to resolve the issue comprehensively.

The Authority highlighted the definitions of 'Inter-State' and 'Intra-State' supplies under the IGST Act, emphasizing that the 'place of supply' and the 'location of supplier' determine the nature of the transaction. Referring to Sec. 10(1)(a) of the IGST Act, the Authority clarified that the place of supply for goods involving movement is where the movement terminates for delivery to the recipient. The applicant's argument that delivery terminates at the factory gate was examined, but the Authority concluded that the movement of goods in ex-factory sales extends beyond the factory gate to the destination state, where the goods are finally received by the recipient or their authorized transporter.

Based on the analysis, the Authority ruled that in the case of ex-factory inter-State sales, where the movement of goods terminates at the destination state, IGST should be charged. The ruling emphasized that the location of the supplier and the place of supply being in different states qualifies the transaction as an inter-State supply, warranting the application of IGST. Therefore, the ruling clarified that IGST is chargeable on ex-factory inter-State supplies made by the applicant.

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