The Authority of Advance ruling (AAR) ruled that Integrated Goods and Service Tax (IGST) is chargeable on ex-factory inter-State supplies.
The applicant, M/s. Penna Cement Industries Limited are manufacturers of cement having two cement plants in Telangana. They occasionally make the inter-State sale of cement on ex-factory/works basis from their plants in Telangana. As per Sec. 10(1)(a) of IGST Act, 2017, place of supply shall be where the movement of goods terminates; When they make ex-factory sales from their plant, delivery terminates at their factory gate itself and therefore, CGST and SGST should be charged on such type of supplies. However, in the section, it is also mentioned that the movement of goods can be by the supplier or the recipient or any other person, and place of supply shall be the location of recipient where delivery terminates to the recipient. In respect of ex-factory sale, though for them supply terminates at the factory gate, yet the further movement is carried by the recipient or transporter (another person) of goods up to the billing address state. Thus, the delivery in such cases terminates in another that State and therefore they should charge IGST in respect of such supplies.
The applicant sought advance ruling on the issue of what tax should be charged on ex-factory inter-State supplies made by them.
The authority consists of Additional Commissioner of State Tax J. Laxminarayana and Joint Commissioner of Central Tax B. Raghukiran Integrated Goods and Service Tax (IGST) is chargeable on ex-factory inter-State supplies.
“Section 9(1) of the GST Act provides for levy of CGST and SGST on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption. Further, Sec. 5(1) of the IGST Act, 2017 prescribes the levy of IGST on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption,” the authority observed.
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