When people talk about Input Tax Credit under GST, most of the focus goes to invoices, GSTR-2B, filing conditions, and timelines. But there’s one part of ITC that quietly creates the most confusion in real world situations — the receipt of goods. ITC rules look simple until you hit cases where goods don’t physically reach you, or someone else receives the goods on your behalf, or goods go directly to job workers, or goods are delivered in parts.
This blog focuses on exactly these situations — Bill-to-Ship-to, third-party movement of goods, job-worker deliveries, and special receipt rules given in GST law. These rules decide when you are considered as having “received” the goods, which is essential because ITC cannot be taken unless goods/services are received (Section 16(2)).
Let’s break everything down in a human-friendly way.
1. Why Receipt of Goods Matters So Much for ITC
Section 16(2) says:
“A registered person shall be entitled to take ITC only when he has received the goods or services.”
But GST law also knows that in modern business:
- Goods often move straight from supplier to customer
- Warehouse may receive goods
- Job worker receives goods on behalf of the principal
- Logistics partners pick up goods on buyer’s behalf
- Multiple parties are involved in between
So the law created special rules for determining “receipt”.
These rules ensure the ITC chain doesn’t break simply because you didn’t physically touch the goods.
2. Bill-to-Ship-to Model — The Most Common Special Receipt Case
If you’ve ever worked in trading, distribution, or drop-shipping-style business, you already know this model.
Authority includes the specific definition extracted from Section 2:
“Where goods are delivered by the supplier to a recipient or any other person on the direction of a third person, it shall be deemed that the third person has received the goods.”
This single sentence is the backbone of the Bill-to-Ship-to scenario.
2.1 What Happens in Bill-to-Ship-to?
There are three parties:
- A – The person who places the order (bills)
- B – The supplier
- C – The actual receiver of goods (ship-to)
So the flow is:
- Invoice: B → A (Bill-to)
- Delivery: B → C (Ship-to)
- Deemed receipt: A is considered to have received the goods even though C physically got them
This is legally important because A can claim full ITC.
2.2 Example (Explained in Simple Language)
Authority explains that when goods are:
- Delivered to a recipient, or
- Delivered to any other person
- On the direction of a third person,
then that third person is treated as the recipient.
✔ Example:
- A (Delhi) orders goods from B (Mumbai).
- A asks B to deliver goods directly to C (Kolkata).
Even though A never touched the goods, A is treated as having received them.
👉 A can claim ITC.
This rule avoids breaking the ITC chain in modern supply models.
3. Third-Party Delivery — Beyond Bill-to-Ship-to
Bill-to-Ship-to is just one type of third-party delivery. But the GST definition is much wider :
“Delivery to a recipient or to any other person on the direction of the third person counts as receipt by the third person.”
This concept covers several real-world scenarios:
3.1 A Simple Logistics Example
A business hires a transport company to pick up goods from a supplier.
- Supplier hands over goods to transporter
- Transporter is appointed by buyer
Even though the buyer hasn't received the goods physically, the law treats it as receipt by buyer.
So the buyer can claim ITC once the supplier uploads the invoice.
3.2 Warehouse Delivery
A directs supplier to deliver goods to A’s warehouse operator or storage partner.
- Supplier → Warehouse (third party)
- Warehouse acknowledges receipt
- A is deemed to have received goods
Thus, ITC is allowed.
3.3 Multiple Intermediary Parties
Think of big modern supply chains:
Supplier → Regional Warehouse → Carrying & Forwarding Agent → Customer
Even with so many parties involved, ITC stays intact because the buyer directs delivery.
4. Goods Delivered to Job Worker — Another Form of “Deemed Receipt”
Key point:
“Goods delivered by the supplier to a job worker on the direction of the principal are treated as received by the principal.”
This rule is crucial because many industries (especially manufacturing) send goods directly from supplier to job worker to save time.
✔ Example:
- Principal (P) buys raw material from Supplier (S).
- P instructs S to ship goods directly to Job Worker (J).
Even though P never saw the goods:
- P is treated as having received the goods
- P can claim ITC immediately
This keeps the ITC chain smooth for factories.
5. Receipt of Goods in Lots or Installments
Another special rule deeply connected to Section 16(2) and example:
“If goods are received in lots or installments, ITC can be claimed only after the last lot is received.”
✔ Example:
- A purchases 1,000 units.
- Supplier sends them in 5 lots of 200 each.
ITC available only after all 5 lots (all 1,000 units) are received.
This prevents claiming ITC early without full receipt.
6. Situations Where “Receipt” Is a Bit Confusing
Some cases look tricky at first glance, but the law has clear interpretations.
6.1 Goods Lost in Transit Before Receipt
If goods are:
- Lost
- Stolen
- Destroyed
before being received → ITC is not allowed.
Because Section 16(2) says receipt is mandatory.
6.2 Goods Rejected and Returned
If goods are:
- Received
- Rejected
- Returned to supplier
ITC must be reversed because supply is undone.
6.3 Bill-to-Ship-to with Rejection at Ship-to Location
Even more tricky:
A bills, C receives, C rejects.
Here’s how GST sees it:
- A was deemed to have received goods.
- A claimed ITC.
- C sent goods back to B.
Now ITC must be reversed by A.
7. Services & Third-Party Receipt — How It Works
The concept of “receipt” is not only for goods.
Services can also be received through:
- Branch offices
- Agencies
- Sub-contractors
- Cloud systems (like software delivered online)
Example:
A company’s Mumbai branch receives a consultancy service on behalf of the head office. Head office can claim ITC if:
- Invoice is issued in head office’s GSTIN
- Service is used for business
8. Delivery on Direction — The Legal Foundation
The exact definition used in GST law:
“Delivery of goods by the supplier to a recipient or any other person on the direction of a third person shall be deemed to be a supply made to the said third person.”
This single definition covers:
- Bill-to-ship-to
- Drop shipments
- Transit supplies
- Warehouse deliveries
- Job worker deliveries
- CF agent receivals
- Transporter pickups
- Export/merchant trading structures
9. Why These Special Receipt Rules Are So Important for ITC
Without these rules, a large portion of modern supply chains would collapse.
Imagine:
- Ecommerce
- Wholesale distribution
- Large-scale trading
- 3PL logistics
- Manufacturing outsourcing
- Job work cycles
If they were all required to physically receive goods before ITC, GST would become impossible to manage.
These rules create smooth ITC flow, regardless of physical movement.
10. Aligned Summary of Receipt Rules
Here’s everything in a quick, simple list:
✔ Bill-to-Ship-to
A is deemed to receive goods even if C gets them.
✔ Delivery on Direction
If goods are sent to any person as directed → the director is recipient.
✔ Job Worker Delivery
Principal is treated as recipient even if goods delivered to job worker directly.
✔ Receipt in Lots
ITC only after last lot is received.
✔ Goods lost/damaged before receipt
No ITC.
✔ Services received by branches/agents
ITC allowed if invoice is in correct GSTIN and business purpose is clear.
✔ Third-party warehousing
Deemed receipt for buyer.
Final Thoughts
This area of GST may look small, but it plays a huge role in ITC claims. Whether you’re dealing with large-scale inventory, ecommerce, warehouses, job workers, or drop-shipping flows, you need to understand these “special receipt rules”. They decide whether ITC is allowed today, tomorrow, or never.
Many ITC disputes come from misunderstanding:
- “deemed receipt”
- “delivery on direction”
- “receipt in lots”
Mastering these rules helps prevent notice letters, reversals, or mismatches later.
