• Dated 30^th December, 2025

Place of Supply Based on Delivery Destination, Not Origin, Demand of CGST & SGST Quashed: Karnataka High Court

BRIEF FACTS:

The assessee, supplied motor vehicles and parts from Karnataka to dealers located in various other States during the period April 2018 to March 2021 and discharged IGST treating the transactions as inter-State supplies. During audit, the department issued a show cause notice alleging that, as per the dealership agreement and invoice terms, the title in goods passed at the factory gate in Karnataka when goods were handed over to a common carrier. On this basis, the department proposed to treat the supplies as intra-State supplies and demanded CGST and SGST in addition to IGST already paid.

ASSESSEE'S CONTENTION:

The assessee contended that, in terms of Section 10(1)(a) of the IGST Act, 2017, the place of supply of goods is the location where the movement of goods terminates for delivery to the recipient, and not the point at which the goods are merely handed over to the transporter. Since, in the present case, the goods were ultimately delivered to dealers located outside the State of Karnataka, the transactions squarely qualified as inter-State supplies, and the payment of IGST was legally correct.

It was further argued that the transfer of title under the Sale of Goods Act, 1930, or the contractual terms governing the sale, has no bearing on the determination of the place of supply under the GST framework, which is governed solely by the statutory provisions of the IGST Act. The assessee also submitted that the proposed demand would result in impermissible double taxation and, in any event, would be entirely revenue-neutral, as the tax paid as IGST would otherwise be available as credit to the recipient.

DEPARTMENT'S CONTENTION:

The Department argued that as per the Sample Dealership Agreement and invoice conditions, delivery was deemed complete at the factory gate and title and risk passed to the dealer upon handing over goods to the common carrier. Relying on provisions of the Sale of Goods Act, 1930, it was contended that the movement of goods terminated in Karnataka itself. Therefore, the assessee wrongly paid IGST and was instead liable to pay CGST and SGST, with liberty to seek refund of IGST paid erroneously.

DECISION:

The Karnataka High Court held that for supplies involving movement of goods, place of supply must be determined solely with reference to Section 10(1)(a) of the IGST Act, i.e., the place where movement of goods terminates for delivery to the recipient. Handing over goods to a common carrier does not amount to termination of movement for delivery. The Court categorically held that passing of title or contractual clauses under the Sale of Goods Act are irrelevant for determining place of supply under GST. Since the goods were delivered outside Karnataka, the supplies were inter-State supplies and levy of CGST and SGST was unsustainable. The impugned show cause notice to this extent was quashed, as it would otherwise result in double taxation

BTA's COMMENT:

This judgment conclusively clarifies that place of supply under GST is destination-based, and contractual terms regarding transfer of title or risk cannot override the statutory scheme of the IGST Act, 2017. It reinforces the principle that GST follows the destination of consumption, and protects taxpayers from double taxation where IGST has already been correctly paid on inter-State supplies.

Case Reference - Toyota Kirloskar Motor Pvt. Ltd. Vs Union of India [Writ Petition No. 6126 of 2024 (T-RES), decided on 27-11-2025]

Author: Madhurima Bose