GST Bill to Ship to Transactions and Valuation Rules
The Rajasthan Authority for Advance Ruling confirmed that multi-party Bill to Ship to transactions are permissible under GST law.
- Ruling
- RAJ/AAR/2018-19/25 dated 02.11.2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Bill to Ship to model is allowed under Section 10(1)(b) of IGST Act.
- E-way bills can list the intermediate buyer as 'bill to' and customer as 'ship to'.
- Transaction value applies when the recipient is eligible for full input tax credit.
In short
Sanjog Steels asked if they could ship goods directly to an end customer while billing an intermediate party, and how to value these goods for GST purposes.
What has changed
How it worked before
Businesses were uncertain if multi-party supply chains involving brand licensing and direct dispatch were fully compliant with GST valuation and e-way bill rules.
What has changed
The authority confirmed that the Bill to Ship to model is valid regardless of the number of parties involved. It also clarified that when the recipient can claim full input tax credit, the transaction value is the correct basis for valuation, even between related parties.
Who this affects
Manufacturers and traders who use direct dispatch models to deliver goods to third-party customers on behalf of intermediate buyers.
An example
Imagine a furniture manufacturer that sells to a distributor, who sells to a retailer, who sells to a home buyer. The manufacturer wants to ship directly to the home buyer. Based on this ruling, the manufacturer can issue an e-way bill naming the distributor as the 'bill to' party and the home buyer as the 'ship to' party.
What you should do
You should review your supply chain contracts to ensure they align with these findings. Remember that an advance ruling only binds the specific business that asked and its local tax office; it is not a general law that automatically applies to your business.
If you do nothing
If you assume this ruling applies to you and your tax officer disagrees, you may face penalties for incorrect valuation or improper e-way bill documentation. Relying on another company's ruling as a legal shield can lead to tax disputes and interest charges during an audit.
The terms explained
- Bill to Ship to
- A transaction where the seller bills one party but delivers the goods directly to a third party at the direction of the buyer.
- Input Tax Credit
- The tax a business pays on its purchases that it can use to reduce the tax it owes on its own sales.
- Advance Ruling
- A formal decision by tax authorities on how GST law applies to a specific business transaction.
The ruling in detail
Authority for Advance Ruling
M/s Sanjog Steels Pvt. Ltd.
RAJ/AAR/2018-19/25 dated 02.11.2018 · Rajasthan
Questions before the authority
- Whether the supply from M/s. SSPL to M/s. X on a Bill to Ship to mode as per provisions of Section 10(1)(b) of IGST Act, 2017 is permissible?
- Whether as per the press note dated 23.04.2018 issued in relation to the transactions of supply u/s. 10(1)(b) of the IGST Act, 2017 the use of E-way bill in the aforesaid facts in the column of ship to of ultimate customer M/s. X is permissible?
- Whether in the aforesaid facts the provisions of Section 15 of the CGST Act, 2017 read with Rule 28 of CGST Rules, 2017 and in particular the second proviso to Rule 28 would apply for the value of supply for the transactions between M/s. SSPL and M/s. RSE and thereafter M/s. RSE and M/s. Goyal as all are registered persons and the transactions are business to business transactions with availability of full Input Tax Credit?
- Whether the transactions between M/s. Goyal and the ultimate customer M/s. X would be covered by the provisions of Section 15 for the value of taxable supply as they are not related persons?
Facts
The applicant manufactures TMT steel bars and sells them under brand names licensed from M/s. RSE and M/s. RPG. The business model involves a Bill to Ship to arrangement where the applicant sells to M/s. RSE, who sells to M/s. Goyal, who then sells to the ultimate customer M/s. X. The goods are dispatched directly from the applicant to the ultimate customer M/s. X.
Ruling
| Question | What the authority ruled |
|---|---|
| Bill to Ship to model | Permissible Under Section 10(1)(b) of the IGST Act |
| E-way bill generation | Permissible Bill to M/s. RSE/RPG and Ship to M/s. X |
| Valuation (SSPL to RSE) | Section 15 read with Rule 28 Second proviso to Rule 28 applies |
| Valuation (Goyal to X) | Section 15 As they are unrelated persons |
The authority ruled that the Bill to Ship to model is permissible under Section 10(1)(b) of the IGST Act. It confirmed that the applicant can issue an e-way bill mentioning M/s. RSE/RPG in the bill to column and M/s. X in the ship to column. It further held that the valuation of supply between the applicant and M/s. RSE is governed by Section 15 read with the second proviso to Rule 28 of the CGST Rules, and that transactions between M/s. Goyal and M/s. X are covered by Section 15.
Reasoning
The authority relied on Section 10(1)(b) of the IGST Act, which allows for the delivery of goods to a third person on the direction of a recipient. It noted that this provision does not limit the number of parties involved in the transaction chain. Regarding valuation, it applied Section 15 of the CGST Act and the second proviso to Rule 28 of the CGST Rules, as the recipient is eligible for full input tax credit. It concluded that the transaction value is the appropriate basis for valuation between related parties in this context.
Provisions relied on
- Section 10(1)(b) of the IGST Act, 2017
- Section 15 of the CGST Act, 2017
- Rule 28 of the CGST Rules, 2017
For the practitioner
This ruling provides **clarity on the operational mechanics** of Bill to Ship to transactions involving multiple parties and the associated e-way bill requirements. It confirms that the **second proviso to Rule 28** is applicable for valuation when the recipient is eligible for full input tax credit. Practitioners can use this to structure multi-party supply chains involving brand licensing and direct dispatch.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/raj.25.2018-19_snajog_steels_pl.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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