Interstate Sale by Composition Dealer

[Gourav Ravi Garg]

Respected professionals, one of my clients is an registered composition dealer in GST. He receives payment from Different state thus selling them goods. Is there is any way, wherein he can continue doing interstate sale ; or any walk around the law or practice?

[KASTURI SETHI]

Inter-State sale is not allowed to the Composition Dealer.

[Sanjeev Agarwal]

Clear conclusion

A composition dealer cannot directly make inter-State outward sales of goods. If goods are actually moved from one State to another pursuant to the sale, the composition restriction applies.

However, payment from another State or having a customer in another State does not, by itself, make the supply inter-State. The actual movement/delivery and place-of-supply facts must be examined.

Legitimate options

1. If goods are delivered within the same State:
   The transaction may be intra-State even if the customer is located/payments originate elsewhere. Verify the actual delivery and contractual facts.

2. If goods are genuinely dispatched to another State:
   The composition dealer cannot continue that direct sale under composition. There is no defensible invoice/payment-based workaround.

3. Independent reseller model:
   A genuine independent reseller can purchase from the composition dealer and separately make the inter-State sale. However, it must be a real commercial transaction, not a paper arrangement.

4. Regular GST:
   If interstate sales are an integral part of the business, the cleanest and lowest-risk solution is to exit composition and operate under the regular scheme.

Bottom line

No legitimate "walk-around" exists for a composition dealer to directly sell and dispatch goods interstate while remaining in composition.
The only defensible planning is to establish that the supply is actually intra-State, or use a genuine independent reseller, otherwise shift to the regular GST scheme.

Risk position: Direct inter-State sale while remaining in composition - High/Clear non-compliance risk.

[Sadanand Bulbule]

I endorse the replies of experts.

[Shilpi Jain]

He has to move to regular registration the moment he has made the inter-State sale

AI Summary

GST composition dealers cannot directly dispatch goods interstate and must use genuine reseller arrangements or shift to regular registration.
GST composition dealers cannot directly make inter-State outward sales of goods while remaining under the composition scheme. Movement of goods from one State to another pursuant to sale attracts the restriction, and payment or invoicing arrangements cannot cure it. A customer or payment originating in another State does not itself make a supply inter-State; actual delivery, movement and place-of-supply facts govern. A genuine independent reseller may separately make an inter-State sale, while businesses undertaking direct inter-State sales should operate under the regular GST scheme.