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Indirect Tax Laws and Practice · Place of Supply

Bill to Ship to Model: Place of Supply of Goods

Updated 11 October 2026 · Fact-checked

In a bill to ship to supply, the supplier delivers goods to one person on the direction of another (the third person) before or during movement. Under section 10(1)(b) IGST Act, the third person is deemed to have received the goods. The place of supply is that person's principal place of business.

Understand Supply on Direction of a Third Person (Bill to Ship to)

Normally goods go from supplier to the buyer. In a bill to ship to deal, the buyer asks the supplier to send the goods to someone else. Three parties are involved: the supplier, the person who directs the delivery (the third person), and the person who actually receives the goods.

Section 10(1)(a) would normally fix the place of supply at the place where the movement of goods ends. If that rule applied here, the place of supply would be the delivery point of the actual receiver. Section 10(1)(b) overrides this for the direction case.

The law says 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 movement of goods, either by transfer of documents of title to the goods or otherwise, it is deemed that the third person has received the goods. The place of supply is then the principal place of business of that third person.

So the physical delivery address does not decide the place of supply. The location of the directing person's principal place of business does. This decides whether the supply is intra-State (CGST plus SGST/UTGST) or inter-State (IGST), so the tax type depends on it.

The direction can be given by transfer of documents of title or by any other means. The key test is that the third person directs the delivery before or during movement of the goods. The third person may act as an agent or on his own account.

One point to note: clause (ca) says that where goods are supplied to a person who is not registered, the place of supply is the address recorded in the invoice, notwithstanding clauses (a) or (c). It overrides only those two clauses. Clause (b) is not named in it, so the bill to ship to rule is read as it stands in the text.

Key rules to remember

Rule of section 10(1)(b)
Place of supply = principal place of business of the third person who directs the delivery
Applies when goods are delivered to a recipient or any other person on the direction of a third person, before or during movement of goods.
Deemed receipt
Third person is deemed to have received the goods
Applies whether the third person acts as an agent or otherwise, and whether by transfer of documents of title or otherwise.
Default movement rule (section 10(1)(a))
Place of supply = location of goods when movement terminates for delivery to the recipient
Used when no third person directs the delivery. Do not use it for a bill to ship to case.
Tax type test
Supplier's location and place of supply in same State → CGST + SGST/UTGST; in different States → IGST
Compare the supplier's location with the third person's principal place of business, not with the delivery point.

How to solve Supply on Direction of a Third Person (Bill to Ship to) questions

Use this method for any bill to ship to question on place of supply of goods within India.

  1. 1Identify the parties: supplier, the person who placed the order and directed delivery (third person), and the person who receives the goods physically.
  2. 2Check that the goods move and that the delivery is made on the direction of the third person before or during movement.
  3. 3If yes, apply section 10(1)(b): the third person is deemed to have received the goods.
  4. 4Find the principal place of business of the third person. This is the place of supply. Ignore the physical delivery address.
  5. 5Note the State of the supplier's location.
  6. 6Compare the two States. Same State: CGST and SGST/UTGST. Different States: IGST.
  7. 7Check the second leg. The third person's own onward supply to the actual receiver is a separate supply with its own place of supply.
  8. 8State the conclusion with the rule and the reason.

Quickest way: Three-line check for bill to ship to

When to use it: Use it in MCQs and short case scenarios where three States are named and you must pick the tax type or the place of supply.

  1. Ask who directed the delivery. That person's principal place of business is the place of supply of the first supply.
  2. Compare that State with the supplier's State. This gives the tax type.
  3. For the second supply (third person to actual receiver), compare the third person's State with the receiver's State, and treat the delivery point as the end of movement.

Common mistakes in Supply on Direction of a Third Person (Bill to Ship to)

  • Taking the delivery address as the place of supply.

    Section 10(1)(a) is learnt first and students apply it to every movement case.

    Fix: When a third person directs delivery, use section 10(1)(b) and take the third person's principal place of business.

  • Using the registered address or any branch of the third person instead of the principal place of business.

    Students overlook the exact words of the clause.

    Fix: Use the principal place of business of the directing person. If the question names it, use that State.

  • Treating the whole deal as one supply with one invoice and one tax.

    Students focus on the physical movement, which is single.

    Fix: Identify two supplies: supplier to third person, and third person to the actual receiver. Decide place of supply for each.

  • Applying clause (b) when the direction is given after the goods have been delivered.

    Students ignore the timing words in the clause.

    Fix: Check that the direction is given before or during movement of goods.

  • Charging IGST because the goods cross State lines physically.

    Students confuse movement with place of supply.

    Fix: Tax type depends on the supplier's location and the place of supply. If both are in the same State, it is CGST and SGST/UTGST even if goods are delivered in another State.

Worked examples

Example 1

Alpha Traders, Mumbai (Maharashtra), supplies goods to Beta Enterprises, whose principal place of business is in Chennai (Tamil Nadu). On Beta's direction, Alpha delivers the goods during movement to Gamma Ltd. in Hyderabad (Telangana). Determine the place of supply and the tax charged on Alpha's invoice.

Show the solution
  1. Parties: supplier Alpha (Maharashtra), directing person Beta (Tamil Nadu), physical receiver Gamma (Telangana).
  2. Goods are delivered to Gamma on Beta's direction, so section 10(1)(b) applies.
  3. Beta is deemed to have received the goods. The place of supply is Beta's principal place of business, Chennai, Tamil Nadu.
  4. Supplier's location is Maharashtra and place of supply is Tamil Nadu. These are different States, so the supply is inter-State.

Answer: The place of supply is Tamil Nadu (Beta's principal place of business) and Alpha charges IGST.

Example 2

Delta Ltd., Pune (Maharashtra), sells goods to Eka Pvt. Ltd., whose principal place of business is in Nagpur (Maharashtra). On Eka's direction, Delta ships the goods directly to Eka's customer Fina Ltd. in Bengaluru (Karnataka). Eka then sells the same goods to Fina, invoicing from Nagpur. State the place of supply and tax for both supplies.

Show the solution
  1. First supply: Delta to Eka. Delivery is made to Fina on Eka's direction, so section 10(1)(b) applies.
  2. Eka is deemed to have received the goods. The place of supply is Nagpur, Maharashtra.
  3. Delta is in Maharashtra and the place of supply is Maharashtra, so the supply is intra-State: CGST and SGST.
  4. Second supply: Eka to Fina. The goods move and Fina is the recipient, with no further third person directing the delivery. Section 10(1)(a) applies: the place of supply is where movement ends, Bengaluru, Karnataka (subject to the rule for unregistered recipients in clause (ca) if Fina is not registered).
  5. Eka is in Maharashtra and the place of supply is Karnataka, so the supply is inter-State: IGST.

Answer: First supply: place of supply Maharashtra, CGST and SGST. Second supply: place of supply Karnataka, IGST.

Exam tips

  • Draw a quick three-box diagram of supplier, third person and physical receiver. It removes confusion in case scenarios.
  • Quote section 10(1)(b) and the phrase deemed to have received the goods in written answers.
  • Always give both legs if the question mentions the third person's onward sale to the receiver.
  • In MCQs, watch for options that give the delivery State as the place of supply. That is the usual trap.

Practice questions from Place of Supply

Supply on Direction of a Third Person (Bill to Ship to): frequently asked questions

What is the bill to ship to model in GST?

It is a deal where the supplier invoices one person but delivers the goods to another on the invoiced person's direction. Section 10(1)(b) IGST Act treats the directing person as the one who received the goods.

What is the place of supply in a bill to ship to case?

It is the principal place of business of the third person who directed the delivery. The physical delivery address is not used for this supply.

Does the third person need to be an agent?

No. The section applies whether the third person acts as an agent or otherwise. What matters is that the delivery is made on that person's direction before or during movement of goods.

How is the second supply treated in a bill to ship to deal?

The third person's sale to the actual receiver is a separate supply. Its place of supply is generally fixed under section 10(1)(a) as the place where movement ends, subject to clause (ca) for unregistered recipients.