Drop Shipping: Meaning, B2B Drop Shipment & GST
Definition
Drop shipping is a way of selling in which the seller does not hold the goods: when an order comes in, the seller buys from a supplier who ships straight to the customer. In B2B it is usually called a drop shipment or direct delivery.
| Term | Drop shipping (drop shipment) |
|---|---|
| In Hindi | ड्रॉप शिपिंग |
| Area | Purchase & stores |
| Search phrase | drop shipping |
| Try it | Purchase order format |
ड्रॉप शिपिंग — हिंदी में अर्थ
ड्रॉप शिपिंग बेचने का ऐसा तरीका है जिसमें विक्रेता माल अपने पास नहीं रखता: ऑर्डर आने पर वह सप्लायर से ख़रीदता है और सप्लायर माल सीधे ग्राहक को भेज देता है। B2B में इसे ड्रॉप शिपमेंट या डायरेक्ट डिलीवरी कहते हैं।
How a drop shipment works
1. The customer places an order with the seller. 2. The seller raises a purchase order on the supplier with the customer's delivery address. 3. The supplier dispatches straight to the customer. 4. The supplier bills the seller, and the seller invoices the customer. The goods never enter the seller's stores.
In manufacturing it is common for bought-out items in a project — a supplier delivering cable drums, a chiller or structural steel straight to site instead of routing them through the factory.
Documents and GST (bill-to ship-to)
Under GST this is a bill-to ship-to supply: the supplier's invoice is billed to the seller but shows the customer's address as the place of delivery, and the e-way bill covers the movement from the supplier to the customer. The seller's own invoice to the customer is still needed. Keep the PO, both invoices and the proof of delivery together.
Benefits and risks
Benefits: no stock to hold, less handling and freight, faster delivery to site. Risks: you depend on the supplier's quality and timing but the customer holds you responsible, you cannot inspect before delivery, and it is easy to forget to invoice the customer because the goods never passed through your stores.
Related tools and guides
Frequently asked questions
What does drop shipping mean?
Selling without holding stock — the supplier ships the order straight to the customer on the seller's behalf.
What is a drop shipment in B2B?
A purchase in which the supplier delivers directly to your customer or site instead of to your own stores.
How does GST work for drop shipping?
It is a bill-to ship-to supply: the supplier bills the seller and ships to the customer, the e-way bill covers that movement, and the seller invoices the customer.
Is drop shipping legal in India?
Yes, provided the GST registration, invoices and e-way bills are in order.
Related terms
- Bin cardA bin card is a record kept at each storage bin or rack by the storekeeper, showing the quantity of an item received, issued and in balance after every transaction. It records quantities only, not values.
- FSN analysisFSN analysis classifies inventory items as Fast-moving, Slow-moving or Non-moving according to how often and how much they are issued over a period, so that stores can focus replenishment on fast items and clear the rest.
- InventoryInventory is the stock of goods a business holds to make or sell — raw material, work in progress, finished goods and consumables. In Hindi it is called इन्वेंटरी, माल सूची or भंडार.
- Lead timeLead time is the time from starting a process to finishing it — for purchase, from placing an order to receiving the goods; for a customer, from their order to delivery.
- MOQ (Minimum Order Quantity)MOQ stands for Minimum Order Quantity — the smallest quantity a supplier will accept in one order for an item, set so that its own setup, packing and freight costs are covered.
- ProcurementProcurement means obtaining the goods and services a business needs — from identifying the need and choosing a supplier to ordering, receiving and paying. In Hindi, procurement means खरीद or प्रापण.