Applicability of GST

[Kaustubh Karandikar]

Goods are sent for display purpose from one state to another state on a returnable basis. Can it be sent under a delivery challan without payment of GST, or a Tax Invoice needs to be prepared by paying GST?

[KASTURI SETHI]

Dear Sir,

Peruse C.B.E. & C. Circular No. 10/10/2017-GST, dated 18-10-2017. Para Nos. 3 & 4 relevant for your query.

[Kaustubh Karandikar]

Thanks Kasturi ji for your prompt help. In my view, the circular mentioned speaks about provisions regarding goods sent on approval basis which will be invoiced subsequently. In my situation, it is purely for demonstration and will be received back after the demonstration and therefore, this circular may not be applicable. Can we take the shelter of Rule 55(c) i.e. transportation of goods for reasons other than by way of supply? and if not, and since this is not a job work, there is no option to pay GST by issuing a tax invoice. Your kind views please.

[Padmanathan KV]

Good can be sent under delivery challan u/r 55 and e-way bill. No need of tax invoice as there is no supply.

[Kaustubh Karandikar]

Thanks Padmanathan ji for your kind advice

[KASTURI SETHI]

Yes. When Rule provides for, Rule is to be preferred to circular. However, I am of the view that goods sent for demonstration or exhibition are also covered in the Board's circular.

[Amit Agrawal]

Rule 55 (1) (c) and referred circular - both - deals same situation on broader level namely 'transportation of goods for reasons other than by way of supply'.

Even 'goods sent for approval' may not get approved and needs to come back.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Correction in earlier post:

Subject situation (sending for display) and referred circular (sending goods on approval basis) - both - deals same situation on broader level namely 'transportation of goods for reasons other than by way of supply' u/r 55 (1) (c).

Even 'goods sent on approval basis' may not get approved / supplied and same needs to be brought back.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

I agree with Shri Kasturi Sethi Ji for his views at serial number 5 above.

[Kaustubh Karandikar]

Thanks Amit ji and Kasturi ji for your valued views. However, how likely the GST authorities taking the following stand on the same?

• According to Schedule I of CGST – Matters to be treated as supply even if made without consideration: 2nd paragraph of this schedule – “Supply of goods or services or both among related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business”.
• Distinct Person – Provision related to distinct person are given under section 25(4) of CGST Act: “A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.”

[Padmanathan KV]

Regarding the last post, Sch I entry 2 coveres situation involving "supply of goods or services or both" between distinct or related person without consideration.

In the instant past, "supply" element itself is not present. ie when goods are sent for just displaying/exhibition and brought back. Therefore, in my opinion, Sch I entry 2 is not attracted.

I dont personally see any reason why dept will object to this kind of transaction.

[Padmanathan KV]

Correction;-

In the last reply of mine, please read "instant query" instead of "instant past".

[Kaustubh Karandikar]

Padmanathan ji thanks for your further advice on this issue. However, As per Sr. No. 1, Schedule - I of Section 7 of CGST Act, 2017, Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business, shall be treated as supply even made without any consideration. Therefore, in my humble view, this transaction also may get fit in to this. Your valuable views please.

[Padmanathan KV]

Dear Kaustubh Sir,

as I explained in Reply No 10, The activity of sending goods for display/exhibition and returning it back does not fit within the scope of supply under section 7. (not because of lack of consideration but because it does not satisfy other essential in the sense that title in goods is not passed on to the distinct person.

Any and all transactions between branches without consideration cannot be said to be supply under Para 2 of Sch I is my humble opinion.

[Shilpi Jain]

The query does not mention that the goods are being sent from one GSTN to the other of the same PAN.

In such a scenario there is no transaction between distinct persons then only delivery challan will suffice.

[Shilpi Jain]

Though in case it is sent to a distinct person in another State you can issue a tax invoice and when it is returned back the said distinct person can raise another invoice to square off the transaction.

[KASTURI SETHI]

Issue is not so grave. Discussion prolonged. Is it not 'phobia' of the department ?

[Ganeshan Kalyani]

The goods can be sent to another state for display purpose under the cover of 'Delivery Challan'. Delivery challan is used when the movement of goods is other than by way of supply.

[Ganeshan Kalyani]

Since the goods are sent for display purpose where customer is not known the raising of tax invoice option may not be excercised.

AI Summary

Transportation other than supply: use a delivery challan for returnable display consignments unless treated as supply between distinct persons.
Whether interstate movement of returnable goods for demonstration is a supply determines GST treatment: if the movement is transportation other than by way of supply, a delivery challan and e way bill suffice and no tax invoice is required; however, movements between distinct registrations or related persons may be treated as supply under Schedule I, in which case parties may issue tax invoices and reciprocal invoices when the goods are returned.