Clarification on movement of goods on approval basis.

Circular No.: 10/10/2017-GST
Date of Circular: 18th October 2017
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Section 168(1): Power to issue instructions for uniformity
• Integrated GST Act, 2017:
  • Section 5: Levy and collection of IGST on inter-State supply
• CGST Rules, 2017:
  • Rule 55(1)(c): Delivery challan for transportation not by way of supply
  • Rule 55(3): Declaration of delivery challan
  • Rule 55(4): Tax invoice after delivery in case of supply
  • Rule 138: E-way bill requirement

Summary of Circular:

This circular clarifies GST provisions applicable to goods carried for supply on approval basis, particularly in cases involving inter-state movement without advance knowledge of actual sales—common in businesses like jewellery.

1. Goods Movement Without Pre-Issued Invoice:
   Goods (e.g. jewellery) may be moved within or outside the State for approval-based supply. As per Rule 55, such movement can be done on a delivery challan, not a tax invoice. The tax invoice can be issued after delivery, once the customer approves the supply.
2. Use of E-Way Bill and Invoice Book:
   The person carrying goods should carry an invoice book and generate a tax invoice at the time of final sale. E-way bill must also accompany the delivery challan where applicable.
3. Inter-State Supply Implication:
   If goods are moved and supplied in another State (from State of registration), it will be treated as an inter-State supply and IGST shall apply as per Section 5 of the IGST Act.
4. Scope of Clarification:
   The circular clarifies that this treatment applies to all types of goods moved under similar conditions—not limited to jewellery.

Source: Circular No.: 10/10/2017-GST