Goods that have been shipped by the seller but not yet received and accepted by the buyer
Goods in transit refers to inventory or merchandise that has been dispatched by the seller or supplier but has not yet been physically received and accepted by the buyer at the destination. During this transit period, the goods are en route — on a truck, train, ship, or aircraft — and their ownership depends on the shipping terms agreed upon. Under Indian business practices, ownership typically transfers based on the terms of the sale: if the terms are FOB (Free on Board) shipping point, the buyer owns the goods as soon as they are dispatched; if the terms are FOB destination, the seller retains ownership until delivery. Tracking goods in transit is important for accurate inventory accounting because these items may need to be included in the buyer's or seller's closing stock depending on the ownership terms. For Indian businesses, goods in transit are especially relevant during inter-state transfers where e-way bills are mandatory under GST for consignments exceeding Rs. 50,000 in value. Proper tracking helps businesses reconcile purchase orders with actual receipts, manage delivery challan documentation, plan warehouse space for incoming stock, and resolve disputes over damaged or missing shipments. Goods in transit also impact working capital calculations since payment may have been made but stock has not yet been received for sale.
A spice trader in Kochi places an order for 200 bags of turmeric powder from a supplier in Erode, Tamil Nadu. The supplier dispatches the goods on March 15 with a delivery challan and e-way bill. The goods are loaded on a truck and expected to arrive in Kochi by March 18. On March 16, the spice trader's inventory system shows 200 bags as 'goods in transit' worth Rs. 3,60,000. This stock is not yet available for sale but is accounted for in the books. On March 18, the goods arrive, the trader inspects the quality, verifies the quantity, and accepts delivery. The status changes from 'in transit' to 'in stock' and the 200 bags become available for sale.
It depends on the ownership terms. If you have paid for the goods or the terms specify that ownership transfers on dispatch (FOB shipping point), then goods in transit should be included in your closing stock even though they have not physically arrived. If ownership transfers only on delivery (FOB destination), they remain in the seller's stock until received by you.
Yes, under GST rules, an e-way bill is mandatory for the movement of goods valued above Rs. 50,000 between states. For intra-state movement, the threshold varies by state. The e-way bill must accompany the goods during transit and contains details of the consignment, transporter, and vehicle.
If goods are damaged in transit, the buyer should document the damage immediately upon receipt, notify the supplier and transporter, and file an insurance claim if the goods were insured. The buyer can reject damaged goods or negotiate a credit note or replacement. Under Indian contract law, liability depends on the shipping terms and who bore the risk during transit.
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