Claiming GST Input Tax Credit in Bill-to-Ship-to Transactions
The Rajasthan Authority for Advance Ruling confirmed that businesses can claim input tax credit on goods delivered directly to a third party.
- Ruling
- ADVANCE RULING NO.RAJ/AAR/2018-19/23 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
- The company asked if they could claim input tax credit on IGST.
- Goods were purchased but shipped directly to a third party.
- The authority ruled that the company is eligible for the full credit.
In short
In a bill-to-ship-to transaction, the company buys goods but asks the supplier to send them directly to a customer. The company wanted to know if they could still claim the input tax credit (ITC) for the Integrated Goods and Services Tax (IGST) paid, even though the goods never physically entered their own warehouse.
What has changed
How it worked before
Businesses were often uncertain if they could claim credit for goods they did not physically receive, fearing that the tax department might deny the claim.
What has changed
The authority confirmed that the law treats the company as having received the goods once they are delivered to the third party on the company's instructions. This means you can claim the full input tax credit for these transactions, provided the goods are used for your business.
Who this affects
Businesses that act as intermediaries, purchasing goods from one supplier and directing them to be shipped directly to their own customers.
An example
A furniture trader in Jaipur buys chairs from a factory in Punjab and tells the factory to ship them directly to a hotel in Delhi. The trader receives the invoice and pays the IGST. Based on this ruling, the trader can claim the input tax credit for that IGST, even though the chairs never touched the trader's office.
What you should do
If you use this model, ensure your documentation clearly shows the bill-to-ship-to arrangement. Remember that an Advance Ruling only binds the company that asked for it and their specific tax office; it is not a universal law that applies to every business automatically.
If you do nothing
If you assume this ruling automatically protects your specific tax filings, you risk a dispute with your local tax officer. If your documentation does not perfectly match the legal requirements for a bill-to-ship-to transaction, the officer may deny your credit claim. You would then face the cost and time of appealing the decision.
The terms explained
- Input Tax Credit
- A system where you can reduce the tax you owe on your sales by the amount of tax you already paid on your business purchases.
- Bill-to-Ship-to
- A business arrangement where the buyer is billed for the goods, but the supplier delivers them directly to a third party at the buyer's request.
- Integrated Goods and Services Tax (IGST)
- The tax charged on the supply of goods or services that move between different states in India.
The ruling in detail
Authority for Advance Ruling
M/s Umax Packaging (A unit of Uma Polymers Limited)
ADVANCE RULING NO.RAJ/AAR/2018-19/23 dated 02.11.2018 · Rajasthan
Questions before the authority
- Whether ITC of IGST paid on 'bill to ship to' model admissible to the applicant?
Facts
The applicant, based in Jodhpur, purchases goods from M/s Uma Polymers Ltd., Guwahati, and directs them to be shipped directly to M/s Pratap Snacks Ltd., also in Guwahati. This arrangement constitutes a 'bill to ship to' transaction where the applicant acts as the third party directing the movement of goods. The applicant sought clarification on the admissibility of input tax credit for the IGST charged by the supplier in this specific model.
Ruling
| Question | What the authority ruled |
|---|---|
| Admissibility of ITC on 'bill to ship to' model | Admissible Subject to compliance with Section 16 and 17 of the CGST Act |
The authority ruled that the applicant is eligible to claim the full input tax credit of IGST paid on the 'bill to ship to' model. It concluded that the transaction satisfies the requirements for receiving goods under the relevant provisions of the CGST Act, 2017.
Reasoning
The ruling relied on Section 10(1)(b) of the IGST Act, which deems the third party to have received the goods when they are delivered to a recipient on their direction. Consequently, the applicant is considered to have received the goods, fulfilling the condition for claiming ITC under Section 16 of the CGST Act, 2017. The authority further noted that Section 17(1) of the CGST Act allows for credit when goods are used for business purposes. Therefore, the supplier is entitled to charge IGST, and the applicant is **eligible to claim full input tax credit**.
Provisions relied on
- Section 10(1)(b) of the IGST Act
- Section 16 of the CGST Act, 2017
- Section 17(1) of the CGST Act, 2017
For the practitioner
This ruling provides clarity for businesses operating under 'bill to ship to' models, confirming that the intermediary is entitled to claim ITC on IGST charged by the supplier. It settles the eligibility of the applicant to claim credit despite the goods being delivered directly to a third party. It does not, however, address scenarios where the underlying business purpose or documentation requirements of Section 16 are not met.
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.23.2018-19_umax.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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