Introduction:
In the dynamic landscape of Goods and Services Tax (GST) in India, the issuance of a delivery challan holds paramount importance as per Rule 55 of the CGST Rules, 2017. This document not only facilitates the movement of goods for various reasons but also ensures compliance with the mandatory provisions outlined in the rule. In this article, we delve into the nuances of delivery challans, their mandatory contents, and the specific scenarios where they play a crucial role in GST transactions.
The Purpose of a Delivery Challan:
A delivery challan is a document mandated by Rule 55 and is essential for the movement of goods for reasons other than a straightforward supply transaction. Examples include goods sent for job work, items dispatched for sale on approval, demo-goods for exhibition, disposal through gifts or free samples, and the shipment of goods for exhibitions.
Key Points to Note:
(a) Goods Movement, Not Supply: It is essential to understand that a delivery challan pertains to the movement of goods and not the supply of goods. This means that even if goods, which are otherwise taxable as services, are being moved, a delivery challan is required. For instance, goods moved for works contract purposes or goods sent for hire fall under this category.
(b) Goods Sent on Approval: When goods are sent on approval, an invoice is not required at the time of removal. The invoice is to be issued only upon receiving approval from the recipient. However, if the dispatched goods are neither accepted nor returned within six months, a tax invoice must be issued on the day immediately following the expiration of the six-month period.
- Circular No.10/10/2017 dated 18.10.2017 clarifies that for goods removed for line sales or on approval basis, a delivery challan, along with an e-way bill if applicable, should be raised. This is because the supplier cannot ascertain the actual supply at the time of removal. It further emphasizes that such supplies involving movement across states constitute inter-state supplies, attracting integrated tax under section 5 of the IGST Act, 2017.
(d) Goods by Artists: Circular No. 22/22/2017 dated 21.12.2017 extends the same procedure for the removal of goods by artists and the subsequent supply of such goods by artists from galleries.
(e) Goods Sent/Taken Out of India for Exhibition or Consignment: Circular No. 108/27/2019 dated 18.07.2019 provides clarity on the procedure for goods sent/taken out of India for exhibition or on consignment basis for export promotion. It stipulates that such activity, unless covered under Schedule I of the CGST Act, does not constitute supply, as no consideration is involved at that point. Therefore, it cannot be considered a zero-rated supply under section 16 of the IGST Act. Such goods must be accompanied by a delivery challan. If these goods are sold fully or partially within six months, a tax invoice must be issued. If not sold or brought back within the stipulated period, a tax invoice is to be issued on the date of the expiry of six months from the date of removal.
(f) Nature of Goods Movement: While the law focuses on movement in general, a corollary is that a delivery challan may be for movement-outward and/or movement-inward.
(g) Preparation of Delivery Challan: Similar to tax invoices for goods, a delivery challan must be prepared in triplicate. This ensures that all relevant parties have a documented record of the goods movement.
(h) Other Documents: Beyond the delivery challan, other documents must accompany goods during transportation. While the rules provide an illustrative list, it is crucial to note that this list is not exhaustive, emphasizing the need for thorough compliance.
Conclusion:
In conclusion, understanding and adhering to the provisions of Rule 55 regarding the issuance of delivery challans is vital for businesses engaged in the movement of goods for various purposes other than a direct supply. Compliance not only ensures smooth operations but also helps businesses avoid penalties and legal complications in the intricate framework of GST regulations. Staying informed and adopting best practices in this aspect is imperative for businesses navigating the complexities of the GST regime.
