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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

Rao Enterprises buys goods from a registered supplier and instructs the supplier to deliver them directly to Rao's customer, Kiran Ltd, in another city. The supplier transfers the documents of title to goods to Kiran Ltd while the goods are in movement. Rao holds the tax invoice and meets all other conditions of section 16(2). Which statement is correct as regards the condition that the goods must have been received?

Rao is deemed to have received the goods, so the receipt condition is satisfied. The Explanation to section 16(2)(b) treats delivery by the supplier to another person on the registered person's direction, before or during movement, as receipt, whether or not that person acts as an agent.

  1. ARao is deemed to have received the goods, so this condition is metCorrect
  2. BRao cannot take credit until it physically takes delivery at its own premises
  3. COnly Kiran Ltd may take the credit, as it holds the goods
  4. DCredit is allowed only if Rao acts as an agent of Kiran Ltd

Explanation

The Explanation to section 16(2)(b) deems the registered person to have received goods where the supplier delivers them to a recipient or any other person on that registered person's direction, whether acting as agent or otherwise, before or during movement, by transfer of documents of title or otherwise. Therefore Rao is deemed to have received them. The agency requirement in the last option is wrong because 'or otherwise' applies.

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