Place of Supply of Goods In Case Of Ex-Works Transactions

In Toyota Kirloskar Motor Pvt Ltd vs. Union of India, the Karnataka High Court clarified that Section 10(1)(a) of the IGST Act determines the Place of Supply (POS) for Ex-Works (EXW) transactions. Although EXW contracts transfer title at the factory gate, the court held that POS is where physical movement terminates for delivery to the recipient. This statutory factual test overrides private contractual terms or the Sale of Goods Act. This interpretation upholds the destination-based consumption tax principle, preventing double taxation when goods are destined for a different state.

The implementation of the Goods and Services Tax (GST) in India transitioned the indirect tax system from an origin-based model to a destination-based consumption tax. This fundamental shift mandates that the tax accrues to the state where the goods or services are finally consumed or utilized. Central to applying this principle is the accurate determination of the place of supply (POS).

In transactions involving the sale of goods, the determination of POS often centers on physical logistics. However, the commercial reality of "Ex-Works" (EXW) contracts introduces complexities that challenge the straightforward application of the statutory rules, especially when the supplier and the registered recipient are located in different states. Under an EXW contract, the supplier's contractual