Karnataka High Court Quashes Erroneous GST Demand on Toyota Kirloskar Motor Pvt. Ltd.

Court Rules Against Double Taxation and Clarifies Place of Supply Under IGST Act

In a significant ruling, the Karnataka High Court has quashed a show cause notice demanding Central Goods and Services Tax (CGST) and Karnataka Goods and Services Tax (KGST) from M/s Toyota Kirloskar Motor Pvt. Ltd. The court found the notice to be erroneous and arbitrary, clarifying the determination of the place of supply under Section 10(1)(a) of the Integrated Goods and Services Tax (IGST) Act.

The judgment was delivered by Justice S.R. Krishna Kumar in Writ Petition No.6126 of 2024, dated November 27, 2025. The petitioner, Toyota Kirloskar Motor Pvt. Ltd., challenged the notice issued by the Union of India, demanding CGST and KGST for inter-State supplies, despite the company having already paid IGST.

The court examined the provisions of Section 10(1)(a) of the IGST Act, which specifies that the place of supply is where the movement of goods terminates for delivery to the recipient, not at the point where goods are handed over to a common carrier. Justice Kumar pointed out that the liability to pay IGST arises when goods reach their destination outside Karnataka, and thus, the demand for CGST/KGST was unfounded.

The judgment also addressed the issue of double taxation, noting that Toyota Kirloskar Motor Pvt. Ltd. had already paid IGST for goods and freight charges. Any additional demand for CGST/KGST would result in double taxation, which the court deemed unacceptable.

The court further rejected the respondents' contention that the passing of title under the Sale of Goods Act determined the liability to pay CGST/KGST. Justice Kumar clarified that there is no connection between the transfer of title and the liability to pay IGST under the IGST Act.

In light of these findings, the court quashed the impugned show cause notice regarding the demand for CGST/KGST on inter-State supplies. However, the petitioner was directed to file replies to the remaining issues raised in the show cause notice, excluding the matter related to the place of supply.

The judgment is a pivotal clarification on the interpretation of GST laws, particularly concerning inter-State transactions and the avoidance of double taxation. It underscores the importance of adhering to statutory provisions when determining tax liabilities.

Bottom Line:

GST - Determination of place of supply under Section 10(1)(a) of the IGST Act - Movement of goods terminates for delivery to the recipient, not at the point where goods are handed over to the common carrier. Impugned show cause notice directing payment of CGST/KGST quashed for inter-State supply.

Statutory provision(s): Section 10(1)(a) of the IGST Act, Sale of Goods Act, 1930, Section 73 of the CGST Act 2017.

M/s. Toyota Kirloskar Motor Pvt. Ltd. v. Union of India, (Karnataka) : Law Finder Doc Id # 2823027