CBIC Mandate: Importers Must Register for GST in Every State Where Warehouses Are Located—Even Third-Party Facilities

 

The Central Board of Indirect Taxes and Customs (CBIC) has issued a crucial clarification that significantly impacts importers and businesses utilizing third-party warehousing across state lines. This directive necessitates a fundamental reassessment of logistics, compliance, and supply chain strategies for many large-scale operations in India.

In a move to streamline and tighten compliance under the Goods and Services Tax (GST) regime, the CBIC has stated that an importer, whose principal place of business is in one state but stores goods in a warehouse in another, must obtain a separate GST registration in the state where the warehouse is situated. Crucially, this rule holds true even if the storage facility is managed by a third party.

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The Core Clarification: Warehouse as a 'Place of Business'

The clarification arose from a representation seeking guidance on a common business scenario: a company based in Delhi storing its inventory in a third-party cold storage facility in Haryana. The question was whether the Delhi-based business was required to register for GST in Haryana.

The CBIC's answer is a resounding yes.

The legal grounding for this stance lies in Section 2(85) of the CGST Act, 2017, which defines the term 'place of business'. This definition is broad, explicitly including:

...any premises where a person ordinarily carries out business, including a warehouse, a godown, or any other place where a taxable person stores his goods, supplies or receives goods or services...

The CBIC emphasized that if goods are stored in a facility (like a cold storage) and are subsequently dispatched to customers from that location, the warehouse effectively transforms into a place of business. The key factor is the origination of supply, not the ownership or operation of the facility. The involvement of a third-party service provider does not negate the importer’s responsibility to register if supplies are made from that location.

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The Critical Compliance Fallout

This clarification has several major compliance implications that businesses must immediately address:

1. Distinct Taxable Persons

Under the GST framework, establishments under the same Permanent Account Number (PAN) but located in different states are treated as distinct taxable persons.

This means an importer will now have multiple GST registrations across states. The movement of goods between the head office's state and the warehouse state—or between two different state-based warehouses—is considered a supply between distinct persons. Such inter-state stock transfers must be supported by:

• Valid Tax Invoices (or Delivery Challans, depending on the nature of the transfer).
• Applicable E-Way Bills.
• The payment of IGST (Integrated GST) on the value of the stock transfer.

2. Place of Supply Rules for Tax Levy

The location of the warehouse determines the nature of the transaction and the corresponding tax levy on final customer dispatches:

• Intra-state Supply: If goods are sold and dispatched to a customer within the same state as the warehouse (e.g., Delhi goods stored and sold to a customer in Haryana, from the Haryana warehouse), it is an intra-state supply, attracting CGST and SGST.
• Inter-state Supply: If goods are dispatched from the warehouse state to a customer in any other state, it is an inter-state supply, attracting IGST.

3. Treatment of Cold Storage/Warehousing Services

The CBIC also clarified the GST treatment for the third-party services themselves. Services related to cold storage or warehousing are classified as services related to immovable property. Therefore, the location of the warehouse becomes the place of supply for such services, attracting the CGST and SGST of that particular state.

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Action Plan for Businesses

This directive marks a departure from previous interpretations, where some businesses might have assumed that a fixed establishment was required to trigger registration, or that third-party storage was exempt.

Sectors like FMCG, Pharmaceuticals, E-commerce, and other distributors that rely heavily on distributed warehousing networks for faster fulfillment will be most affected.

Companies must take the following steps:

1. Identify all Third-Party Storage Locations: Compile a comprehensive list of all warehouses, cold storage units, and third-party logistics (3PL) facilities from which customer supplies originate.
2. Obtain New GST Registrations: Immediately apply for separate GST registrations in every state where a qualifying warehouse is located.
3. Update Compliance Processes: Establish protocols to ensure all inter-state stock transfers are accounted for, valued correctly, and supported by the necessary invoices and e-way bills.
4. Reassess Logistics Strategy: Businesses may need to re-evaluate whether the cost of increased multi-state compliance (record maintenance, separate returns, inter-state IGST liability, etc.) justifies the current warehousing strategy. Renegotiating contracts with 3PL providers may also be necessary.

This CBIC clarification underscores the GST regime's intent to capture tax at the point of consumption, ensuring that the state from which goods are supplied receives its due share of State GST (SGST) or appropriate tax on stock movement. Compliance is now more crucial than ever for businesses with pan-India distribution networks.