Bill to ship to transactions and Section 10(1)(b)
Three parties, two invoices, one deeming fiction, and a very large number of wrongly charged demands.
Section 10(1)(b) of the IGST Act provides that where goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during the movement of goods, it shall be deemed that the third person has received the goods and the place of supply of such goods shall be the principal place of business of that third person. The consequence is that the first supply is taxed by reference to the bill to party's location, not the delivery address.
The mechanism
A in Gujarat sells to B in Maharashtra, and B directs A to deliver to C in Tamil Nadu.
For the supply from A to B, the place of supply is B's principal place of business in Maharashtra. A charges IGST.
For the supply from B to C, the ordinary rule applies and the place of supply is where the goods are delivered, Tamil Nadu. B charges IGST.
The physical movement is from Gujarat to Tamil Nadu, which is why order entry teams default to the delivery state and charge the wrong tax on the first leg.
Where B and C are in the same state, the second leg is intra state and CGST and SGST apply, while the first leg remains inter state.
Documentation
A's invoice shows B as the recipient with B's GSTIN, and C's address as the ship to address. Both must appear.
The e-way bill must be generated correctly for a bill to ship to movement, with the bill to and ship to details as prescribed, and the department's clarification on which party generates it should be followed.
B's invoice to C is issued without a further movement of goods, and B must have both invoices traceable to the same consignment.
Credit for B depends on the deeming fiction: B is deemed to have received the goods, which satisfies Section 16(2)(b).
Where it goes wrong
The first supplier charges CGST and SGST of the delivery state, or IGST to the wrong state, requiring a Section 77 correction.
The bill to party's credit is questioned because the goods never reached its premises. The answer is the deeming provision and the second proviso to Section 16(2)(b).
The e-way bill shows only one party, so the department treats the transaction as a single supply and questions the second invoice.
Export and SEZ variants, where the third party is outside India or in a zone, and the analysis changes entirely.
What to do on Monday
Configure the order entry system with separate bill to and ship to fields, and drive the tax determination from bill to.
Include both the recipient GSTIN and the ship to address on every invoice.
Train the logistics team on e-way bill generation for bill to ship to movements.
Reconcile the two invoices to the same consignment where you are the middle party.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Which state's tax does the first supplier charge?
The place of supply is the bill to party's principal place of business, so the tax follows that location and not the ship to address.
Can the bill to party claim credit without receiving the goods?
Yes. The deeming provision and the explanation to Section 16(2)(b) treat it as having received them.
Who generates the e-way bill?
Either party may, following the prescribed manner for bill to ship to movements. Follow the departmental clarification and keep the record.
What if the ship to party is in the same state as the supplier?
The first leg still follows the bill to party's location, which may make it inter state despite a local delivery.
How do we correct a past error?
Through the Section 77 route: pay the correct tax and claim a refund of the wrongly paid tax.
In this cluster
- Place of supply under GST: the full decision tree
- Intermediary services: characterisation, exposure and structuring
- Export of services: the five conditions and where claims fail
- Dharmendra M. Jani: the constitutional attack on intermediary taxation, and where it stands
- Mohit Minerals: ocean freight, composite supply, and the sentence that changed GST federalism
- Import of services and reverse charge under Section 5(3) of the IGST Act
- OIDAR services: registration, compliance and the 2023 amendment
- High seas sales, bonded warehouse transfers and Schedule III
- Merchant trade and out and out supplies
- Goods transport agencies: reverse charge, the rate option and place of supply
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.