2015 (6) TMI 1265 - AAR - VAT and Sales Tax

Classification of goods - rate of tax on sale of IT Products/Cables and other Apparatus from their Trading Unit located in Free Trading and Warehousing Zone (FTWZ), J Matadee FITZ, Mannur and Vallarpuram Village, Sriperumbudur Taluk, Kanchipuram District, Tamil Nadu to another trading unit in the same FTWZ, developed under Indian SEZ Act, 2005 - HELD THAT - In order to effect bond-to-bond transactions involving goods or services, trader s warehouse located ina SEZ/FTWZ has to apply to the Appropriate Customs. Authority having jurisdiction over the area where the SEZ/FTWZ is located, to operate the warehouse and to transact from thereon in respect of goods or services. The depositor of the warehoused goods, to transfer the bonded goods from one warehouse located in SEZ/FTWZ to another warehouse located in same or different SEZ/FTWZ, has to get permission from the Customs Authorities so authorised, as per the legal formalities, prescribed by the Customs Act, 1962. If all the provisions under SEZ Act, 2005 TN SEZ (Special Provisions) Act, 2005, Section-5(1) and (2) of CST Act, 1956 and Section-67 of the Customs Act, 1962, the transfer of bonded goods from one warehouse in FTWZ to another bonded warehouse located in the same FTWZ or another FTWZ is to be treated as having taken place beyond the Customs Frontiers of India not cleared for home consumption and would therefore not falling under the purview of either the TNVAT Act, 2006 or the CST Act, 1956. Summarily, the transfer of warehoused goods in a bonded warehouse located in FTWZ to another warehouse located in same or another FTWZ, is to be treated as sale or purchase effected in the deemed foreign territory, i.e. beyond the Customs Frontiers of India, not liable to tax under TNVAT Act, 2006 or under CST Act, 1956. It may therefore be clarified that the sale of IT products/cables and other apparatus from their Trading Unit located in Free Trading and Warehousing Zone (FTWZ), J Matadee FTZ, Mannur and Vallarpuram Village, Sriperumbudur Taluk, Kanchipuram District by the applicant -dealer to another dealer who is also having trading and warehousing facility in the same FTWZ or in another FTWZ is eligible for exemption under TNVAT Act, 2006. Dated this the 22nd day of June 2015.

Summary

Issues involved:
1. Clarification sought on the rate of tax for sale of IT products/cables and other apparatus from a trading unit in a Free Trading and Warehousing Zone (FTWZ) to another trading unit within the same FTWZ.
2. Interpretation of provisions under the Tamil Nadu Value Added Tax Act, 2006, Special Economic Zone Act, 2005, and Customs Act, 1962 regarding tax liability in transactions within FTWZ.
3. Applicability of exemptions and benefits under the SEZ Act, 2005 to units in Free Trading and Warehousing Zones (FTWZ).

Analysis:
The case involved an application for clarification under Section 48-A (1) of the TNVAT Act, 2006 regarding the rate of tax on the sale of IT products/cables and other apparatus from a trading unit in a Free Trading and Warehousing Zone (FTWZ) to another unit within the same FTWZ. The applicant-dealers procured goods from another unit in the same FTWZ and sought clarity on the applicable VAT rate for sales within the FTWZ. The Authority examined the definitions of Special Economic Zone (SEZ) and Free Trading and Warehousing Zone under the SEZ Act, 2005 to determine the tax implications of transactions within FTWZ.

The judgment highlighted that transactions within FTWZ are to be treated as export/import under the SEZ Act, 2005, exempt from CST and VAT as per Section 5(1) & (2) of the CST Act, 1956. It was clarified that sales between trading units in FTWZ are considered to occur beyond the Customs Frontiers of India, exempt from tax liability under TNVAT Act, 2006 or CST Act, 1956. The benefits and exemptions provided under the SEZ Act, 2005 were extended to units in FTWZ, considering them as deemed Foreign Territory within Indian Territory.

Additionally, the judgment emphasized that goods or services transferred within FTWZ are exempt from tax, duties, or fees as per the SEZ Act, 2005. The State Government was empowered to exempt State taxes, levies, and duties for entities in SEZ/FTWZ under Section 50 of the SEZ Act, 2005. Furthermore, the TN SEZ (Special Provisions) Act, 2005 provided exemptions on purchases under State Sales Tax Laws for developers and entrepreneurs in SEZ/FTWZ.

Overall, the judgment concluded that sales of IT products/cables and other apparatus within FTWZ are eligible for exemption under the TNVAT Act, 2006. The transfer of goods within FTWZ was deemed to occur beyond the Customs Frontiers of India, not subject to tax under TNVAT Act, 2006 or CST Act, 1956. The clarification provided on the tax liability for transactions within FTWZ aimed to ensure compliance with relevant legal provisions and exemptions applicable to units in Special Economic Zones.