A bill-to ship-to transaction arises when one person buys goods from a supplier but instructs that supplier to deliver the goods directly to another person or location. The commercial flow and the physical movement therefore do not look identical. That difference is exactly why GST treatment can be confusing: the place where the truck ends its journey is not automatically the place of supply for every invoice in the chain.
The core rule is in section 10(1)(b) of the Integrated Goods and Services Tax Act, 2017. The CBIC text of the IGST Act provides that where goods are delivered by a supplier to a recipient or another person on the direction of a third person, before or during movement, that third person is deemed to have received the goods and the place of supply is the principal place of business of that third person.
How the three-party structure works
Consider three parties: Supplier A sells goods to Buyer B. Buyer B separately sells those goods to Customer C. Instead of A first delivering to B and B arranging another movement to C, B instructs A to ship the goods directly to C. There is one physical movement, but there can be two commercial supplies and two tax invoices.
For the first supply, A is the supplier and B is the person directing delivery to C. Section 10(1)(b) treats B as having received the goods for place-of-supply purposes. Therefore, the place of supply for A's invoice to B is B's principal place of business, not merely C's delivery address.
The second supply, from B to C, must be analysed separately under the applicable place-of-supply provisions. Do not copy the tax treatment of A-to-B mechanically onto B-to-C; each supply has its own supplier, recipient and place-of-supply analysis.
Worked example: deciding IGST versus CGST and SGST
Assume A is registered in Maharashtra, B's principal place of business is in Karnataka, and B directs A to deliver the goods to C in Maharashtra. For A's supply to B, section 10(1)(b) makes Karnataka the place of supply because B is the directing third person. Since A is located in Maharashtra and the place of supply is Karnataka, the A-to-B supply is inter-State and ordinarily attracts IGST, even though the goods physically move within Maharashtra to C.
This is the key practical lesson: physical destination and place of supply can diverge in a bill-to ship-to structure. The tax team should map the contractual supply before deciding the tax component.
Can B claim ITC even though B never physically receives the goods?
Physical possession by B is not, by itself, required in this structure. Section 16(2) of the CGST Act contains a deemed-receipt explanation: a registered person is treated as having received goods where the supplier delivers them to another person on that registered person's direction before or during movement. The relevant statutory text is available on the CBIC CGST Act page.
This deemed-receipt rule solves the obvious practical problem created by direct delivery. It does not, however, mean that every ITC condition disappears. The buyer should still test the other applicable conditions under section 16 and maintain a defensible document trail connecting the purchase invoice, sale invoice, delivery instruction and movement of goods.
What should appear in the documentation?
A clean audit trail should distinguish the billing party from the delivery location. Depending on the transaction and applicable invoice rules, records should make it possible to identify who purchased the goods, who instructed the direct delivery, where the goods were shipped and which invoice relates to which supply. Section 31 of the CGST Act governs tax invoices; CBIC's official Section 31 page is a useful statutory reference.
Finance teams should avoid treating the ship-to address as a substitute for the recipient's GST identity. The purchase order, tax invoice, delivery instruction, transporter document and accounting entries should tell one consistent story.
How is the e-way bill handled?
CBIC's official e-way bill FAQ specifically addresses bill-to ship-to transactions. It explains that the Billing To GSTIN and trade name are entered in the billing portion while the Ship To address reflects the destination of movement. The FAQ also explains that where the ship-to State differs from the bill-to State, tax components are entered according to the billing-party relationship for the relevant invoice. See the CBIC e-way bill FAQ.
Portal fields and e-way bill procedures can evolve, so teams should verify the current portal workflow before processing a live transaction. The important conceptual point is to preserve both dimensions: the commercial bill-to party and the physical ship-to destination.
Practical checklist for finance teams
- Identify every commercial supply in the chain instead of looking only at the truck movement.
- For the first supply, determine whether another person directed the supplier to deliver to the final recipient.
- Apply section 10(1)(b) where its conditions are met and identify the directing person's principal place of business.
- Compare supplier location with the legally determined place of supply before selecting IGST or CGST plus SGST.
- Analyse the second supply independently.
- Ensure purchase orders and invoices clearly identify the bill-to party and delivery instruction.
- Retain proof connecting the direct shipment to the buyer's instruction.
- Check section 16 conditions before taking ITC; do not rely only on the deemed-receipt explanation.
- Populate e-way bill billing and shipping details consistently with the invoice and actual movement.
- Investigate mismatches between GSTIN, place of supply, delivery address and accounting records before filing returns.
Common mistakes
- Using the physical destination as the place of supply automatically: section 10(1)(b) can produce a different result.
- Assuming there is only one supply because there is one movement: the contractual chain may contain two supplies.
- Denying ITC solely because the buyer did not physically receive the goods: section 16 contains a deemed-receipt rule for directed delivery.
- Mixing bill-to and ship-to GSTINs: this can create invoice, e-way bill and reconciliation problems.
- Ignoring the second invoice: B-to-C requires its own tax analysis.
Practical takeaway
Bill-to ship-to GST treatment becomes manageable once the team separates commercial supply from physical movement. First identify who contracts with whom, then apply section 10(1)(b) to the directed-delivery leg, determine the tax type from supplier location and statutory place of supply, check deemed receipt and other ITC conditions, and finally make the invoice and e-way bill records match that analysis. A documented transaction map is far safer than deciding GST merely from the truck's destination.
