Library / Goods and Services Tax: The Professional's Master Guide

54. Case Study 10: Importer and Distributor

54.1 Facts

Oceanic Instruments Pvt. Ltd., Chennai, Tamil Nadu, imports laboratory instruments and sells them in India. Transactions in July 2026:

Direct import from Japan: FOB USD 46,500, freight USD 3,000, insurance USD 500. Customs exchange rate Rs. 85 per USD. Basic customs duty (BCD) 10% (tariff rate assumed for this case), Social Welfare Surcharge (SWS) 10% of BCD, IGST 18%.
High sea purchase from Pacific Trade Links LLP, which imported goods of CIF USD 20,000 (Rs. 17,00,000) and sold them to Oceanic for Rs. 18,00,000 by endorsing the bill of lading before arrival.
Annual subscription to a US laboratory data software, USD 12,000, used in the business.
Sale of three analysers at Rs. 8,00,000 each to Deccan Diagnostics Pvt. Ltd., Bengaluru, shipped on Deccan's instruction directly to a hospital in Hyderabad, to which Deccan resold them for Rs. 27,00,000.
Sales within Tamil Nadu: Rs. 40,00,000 at 18%.

54.2 Issues

Customs value, duties and IGST on import, and credit of IGST.
High sea sale: where IGST is paid and on what value.
Import of software services under reverse charge.
Place of supply and documents in a bill-to-ship-to sale.

54.3 Analysis and computation

CIF value: 46,500 + 3,000 + 500 = USD 50,000 x 85 (assessable value)	Rs. 42,50,000
BCD at 10%	Rs. 4,25,000
SWS at 10% of BCD	Rs. 42,500
Value for IGST	Rs. 47,17,500
IGST at 18%	Rs. 8,49,150
Total duty and tax on the bill of entry	Rs. 13,16,650

IGST of Rs. 8,49,150 is credit for Oceanic under section 16. It flows into GSTR-2B from the customs data, and the bill of entry is the document for credit. BCD and SWS are costs, so the landed cost for inventory is Rs. 47,17,500.

Illustration 221: High sea purchase

Step 1: A sale by the consignee by endorsing documents of title after dispatch from the port of origin and before clearance for home consumption is neither a supply of goods nor services (paragraph 8(b) of Schedule III). Pacific charges no GST.

Step 2: Oceanic files the bill of entry. Customs takes the high sea sale price, which includes Pacific's margin, as the value: Rs. 18,00,000.

Step 3: BCD Rs. 1,80,000; SWS Rs. 18,000; value for IGST Rs. 19,98,000; IGST Rs. 3,59,640.

Step 4: IGST is paid once, at customs, by Oceanic, and Oceanic takes the credit. Keep the high sea sale agreement and endorsed bill of lading on file.

Software. An import of services by a business is taxed under reverse charge (section 5(3) of the IGST Act). Value at Rs. 85: Rs. 10,20,000; IGST Rs. 1,83,600, paid in cash and taken as credit in the same month. The time of supply is the earlier of the date of payment and the day after 60 days from the supplier's invoice (section 13(3) of the CGST Act).

Illustration 222: Bill-to-ship-to sale

Step 1: Section 10(1)(b) of the IGST Act: where goods are delivered to another person on the direction of a third person, the third person is deemed to have received them, and the place of supply is its principal place of business.

Step 2: Oceanic to Deccan: place of supply Karnataka. Inter-State: IGST 24,00,000 x 18% = Rs. 4,32,000.

Step 3: Deccan to hospital: goods delivered in Telangana, inter-State from Karnataka: IGST 27,00,000 x 18% = Rs. 4,86,000.

Step 4: Deccan takes credit though the goods never reached Karnataka, because section 16(2)(b) treats goods delivered to another person on its direction as received by it.

Step 5: One e-way bill covers the movement: bill-to Deccan (Karnataka GSTIN), ship-to the hospital address. Oceanic's tax invoice shows both addresses.

The month's set-off for Oceanic:

IGST credit: import + high sea + software	Rs. 13,92,390
Less: IGST on sale to Deccan	Rs. 4,32,000
Less: CGST on Tamil Nadu sales, paid from IGST credit	Rs. 3,60,000
Less: SGST on Tamil Nadu sales, paid from IGST credit	Rs. 3,60,000
IGST credit carried forward	Rs. 2,40,390

Output tax is fully covered by credit. The only cash payment for the month is the reverse charge of Rs. 1,83,600 on software, which cannot be paid from the credit ledger.

54.4 Compliance and documentation

Bill of entry and customs duty payment through ICEGATE; check that IGST reflects in GSTR-2B under imports before claiming.
Reverse charge on software in Table 3.1(d); credit in Table 4A(2).
GSTR-1 invoice to Deccan with place of supply Karnataka; e-invoice and e-way bill.
Import records reconciled monthly: bill of entry IGST against GSTR-2B and books.

Key point

Lessons

IGST on imports is credit; BCD and SWS are costs. Price the goods on the right base.

In a high sea sale, the whole chain's margin is taxed once, at customs.

In bill-to-ship-to, the place of supply follows the person who gave the delivery instruction.

Chapter summary

• Direct import bore duty and IGST of Rs. 13,16,650, of which IGST Rs. 8,49,150 is credit.

• High sea sales are outside GST; IGST is paid at customs on the high sea price.

• Software imported bears reverse charge IGST of Rs. 1,83,600, paid in cash.

• Bill-to-ship-to supply to Deccan is inter-State with place of supply Karnataka.