IGST Liability Depends on Destination of Goods, Not Origin; Says Transfer of Title Has No Nexus with Tax U/s 10(1)(a): Karnataka HC

The Karnataka High Court while interpreting Section 10(1)(a) of IGST Act, 2017, held that the Place of Supply (POS) of goods must be determined by considering the place where the movements of goods terminates for delivery to the recipient and not at the place where the movement of goods originates and the goods are handed over to the common carrier . The bench of Justice S.R.Krishna Kumar has observed that there is no nexus between passing of title of goods based on the terms and conditions of the dealership agreement, invoice and the Sale of Goods Act and the liability to pay IGST in terms of Section 10(1)(a) of the IGST Act. The dispute arose from a comprehensive GST audit conducted on Toyota Kirloskar Motor Pvt. Ltd., following which the company received a show-cause notice dated 30 December 2023. The notice demanded CGST, KGST, IGST, and Compensation Cess totaling more than ₹4,500 crore across six audit objections. Among these, the largest and most contentious issue was “OBS 1090810,” under which the department alleged that Toyota had wrongly treated certain supplies as inter-state transactions and paid IGST instead of CGST and KGST. This single objection alone formed nearly the entire tax demand and became the primary focus of the company’s writ petition before the Karnataka High Court. The department contended that the terms of the Sample Dealership Agreement and the conditions printed on Toyota’s tax invoices indicated that the company transferred the title and risk in goods to dealers at the moment the vehicles were loaded onto a common carrier at Toyota’s factory in Bidadi, Karnataka. Relying on provisions of the Sale of Goods Act, 1930, the authorities argued that this constituted “delivery” within Karnataka. As a result, they claimed that the entire supply was an intra-state transaction subject to State and Central GST, not inter-state IGST. They further stated that if Toyota had mistakenly paid IGST, it should seek a refund and still remain liable to pay CGST and KGST. Toyota contended that GST law determines the place of supply not by looking at when risk or title passes under a contract, but by examining where the movement of goods terminates for delivery to the buyer. The company contended that its supplies to out-of-state dealers involved actual physical movement of vehicles to destinations outside Karnataka, and delivery to a transporter could not be equated with delivery to the dealer. Therefore, under Section 10(1)(a) of the IGST Act, the place of supply was clearly the dealer’s location in another State, making the supply inter-state. Toyota argued that it had correctly paid IGST—not just on the vehicles but also on freight—and that the department’s stand would lead to impermissible double taxation. The High Court examined both sides and observed that GST statutes expressly provide that the place of supply for goods involving movement is the location where movement ends for delivery to the recipient. The Court found that the department’s reliance on the Sale of Goods Act and contractual clauses was misplaced, as these had no bearing on the destination-based nature of GST. The Court held that delivery to a transporter does not constitute delivery to the buyer for the purposes of Section 10(1)(a). Therefore, the supplies were indubitably inter-state transactions, and Toyota’s IGST payments were proper. The Court also noted that Toyota had already paid IGST on both goods and freight, and requiring the company to pay CGST and KGST in addition would amount to double taxation. It further remarked that any alleged misclassification of place of supply would lead to a revenue-neutral situation, since IGST is shared between the Centre and the consuming State. This reinforced the view that the massive demand raised under OBS 1090810 was unjustified. The High Court quashed this part of the SCN, while allowing the other five issues raised in the notice to proceed through regular adjudication. Toyota has been granted eight weeks to submit its replies on these remaining matters. Case Details Case Title: M/S. Toyota Kirloskar Motor Pvt. Ltd Versus UOI Case No.: Writ Petition No.6126 Of 2024 (T-Res) Date: 27/11/2025 Counsel For Petitioner: Ravi Raghavan Counsel For Respondent: Gowthamdev C. Ullal Click Here To Read Order Read More: Staff Shortage, Infra Delays May Push GSTAT State Bench Rollout Beyond December

IGST Liability Depends on Destination of Goods, Not Origin; Says Transfer of Title Has No Nexus with Tax U/s 10(1)(a): Karnataka HC

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