IGST Act | Place Of Supply Depends On Where Movement Terminates, Not Where Goods Were Handed To Carrier: Karnataka High Court

Section 10(1)(a) of the Integrated Goods and Services Tax (IGST) Act, 2017, provides that the place of supply for goods that are moved, whether by the supplier, recipient, or another party, is the location where the movement of goods concludes for delivery to the recipient.

Justice S. R. Krishna Kumar stated that the assessee had not handed over the goods to the common carrier for the purpose of delivery to the ultimate destination; the liability to pay IGST under Section 10(1)(a) would arise only upon the movement of the goods terminating for delivery to the recipient at various places outside Karnataka. Undisputedly, the supply of goods is inter-State supply and not intra-State supply so as to attract CGST or KGST.

In the case at hand, during the Audit of the assessee, it was observed by the auditors that the assessee was paying IGST on the supply of motor products to the dealers who are registered in different states.

One of the main allegations was that the assessee had wrongly paid IGST on inter-State supplies of motor vehicles to dealers located outside Karnataka.

The Show Cause Notice calls upon the assessee to pay CGST and SGST by placing reliance upon the terms and conditions in the Sample Dealership Agreement entered into between the assessee and the dealer.

The department argued that the place of supply of goods would have to be determined by reckoning/considering the place where the movements of goods terminates for delivery to the recipient and not at the place where the movement of goods originates and the goods are handed over to the common carrier especially in the light of the undisputed fact that the ultimate destination where the movement of goods terminates for delivery to the recipient is outside Karnataka.

The assessee relating to place of supply in respect of Interstate supply of goods, noted that the department has come to the incorrect conclusion that despite the assessee having already paid the entire IGST in terms of Section 10(1)(a) of the IGST, assessee would once again be liable to pay CGST and KGST in relation to the very same amount which is contrary to the material on record.

The bench opined that there is no nexus or connection whatsoever between passing of title of goods from the assessee to the department by virtue of the terms and conditions of the Sample Dealership Agreement, invoice and the Sale of Goods Act and the liability to pay IGST in terms of Section 10(1)(a) of the IGST Act, which specifically contemplates that the place of supply of goods would be the place of the recipient when movement of goods terminates for delivery to the recipient.

The bench stated that the material on record undisputedly discloses that the assessee has already paid IGST not only for the goods but also for the freight charges, and any additional amount sought to be demanded from the assessee would amount to double taxation.

The bench opined that the impugned Show Cause Notice calling upon the assessee to pay CGST / KGST on the aforesaid supply of goods is clearly erroneous, arbitrary and contrary to Section 10(1)(a) of the IGST Act.

In view of the above, the bench partly allowed the petition and quashed the demand related to the supply of goods.

Case Title: M/s Toyota Kirloskar Motor Pvt. Ltd. v. Union of India

Case Number: WRIT PETITION NO.6126 OF 2024 (T-RES)

Counsel for Petitioner/Assessee: Veeresh Prasad M.S.

Counsel for Respondent/Department: Gowthamdev C. Ullal, Jeevan J. Neeralgi

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