2018 (12) TMI 144 - AAR - GST

Levy of GST - supply of goods located outside India to customers within India without physically bringing the goods to India - out out supplies export supplies or exempted supplies? - High seas sales. Held that - The applicant would be purchasing goods from M/s. Innospec on the basis of purchase orders received from their customer in India and the said goods would be delivered by M/s. Innospec from outside India to the ship/ vessel of the customer which is also outside India (non-taxable territory) i.e. Singapore. The order received by the applicant from their customers in India and order placed by them on M/s. Innospec are back to back orders. Thus it is very clear that the goods are delivered by M/s. Innospec from a place situated outside the taxable territory of India to their customer s vessel which is also located outside the taxable territory of India - the transaction is similar to the selling of goods on High Seas Sale basis since in both the cases the goods purchased do not cross the customs frontiers of India. The supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce - From the transactions placed there is no doubt that the goods of the applicant would be imported goods if they are brought from outside the country into India and it is clear that when the said goods are delivered/supplied from a place outside India to a place outside India these goods have not crossed the customs frontiers of India - Thus clearly the transaction in these goods are in the nature of inter-state supply as per Section 7(2) of the IGST Act. The integrated tax on goods imported into India is to be levied and collected in accordance with Section 3 of the Customs Tariff Act 1975 and Section 12 of the Customs Act 1962 and the same is to be levied and collected at the time of import into India. The goods are considered to be imported into India only after they clear the customs frontier after compliance Of applicable procedures and payment of duty as applicable - as per Section 7(2) of the IGST Act and proviso to Section 5(1) of the IGST Act it is very clear that in respect of import goods there is no levy and collection except in accordance with the provisions of Section 12 of the Customs Act 1962 and Section 3 of the Customs Tariff Act 1975. Thus in case of goods supplied on an out an out basis as is in the present case there is no levy till the time of their customs clearance in compliance with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act - In view of this the import goods sold from and to a non-taxable territory though they are clearly in the nature of inter-state supply would come in the category of exempt supply as no duty is leviable on them except in accordance with proviso to Section 5(1) of the IGST Act. The goods sold in the subject transaction are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act 1962 and Section 3 of the Customs Tariff act 1975 - the position is further reiterated and confirmed by Circular No. 3/1/2018 - IGST dated 25.05.2018 issued by the Central Board of Indirect Taxes and Customs GST Policy Wing. Ruling - The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India. The supplies in the present case would be non-taxable supply as per Section 2(78) of the CGST Act 2017 which means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services tax Act.

Summary

Issues Involved:
1. Liability to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.
2. Classification of out & out supplies as export supplies or exempted supplies for GST purposes.

Detailed Analysis:

Issue 1: Liability to Pay GST on Supply of Goods Located Outside India

The applicant, a private limited company, is engaged in trading marine fuel additive chemicals and is an authorized dealer of Innospec Limited, UK. In the specific transaction, the applicant received a purchase order from an Indian company to deliver goods directly to a vessel at Singapore Port. The applicant placed a corresponding order with Innospec Limited, which delivered the goods to the vessel at Singapore. The applicant did not charge GST on the invoice raised to the Indian company, considering the supply to be non-taxable under GST in India.

The applicant contended that GST is not applicable based on the following grounds:
- The supply does not take place in India.
- The transaction is an out & out transaction.
- The place of supply cannot be determined under Sections 10 or 11 of the IGST Act, 2017.
- Section 7(5) of the IGST Act, 2017 is not applicable.
- The goods are not consumed in any state in India.

The jurisdictional officer argued that the delivery of goods was not proven to be outside India and thus liable for GST at 18%.

Observations:

The authority examined the facts and determined that the goods were delivered from outside India to a vessel also located outside India. This transaction is akin to a high seas sale, where goods do not cross the customs frontiers of India. According to Section 7(2) of the IGST Act, 2017, such transactions are considered inter-state supplies. However, as the goods did not cross into India, they are not subject to GST until they clear customs.

Conclusion:

The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.

Issue 2: Classification of Out & Out Supplies for GST Purposes

The applicant argued that the transaction should be considered an out & out transaction, not liable for GST in India. The supply is neither an import nor an export of goods, as the goods remain outside India.

Observations:

The authority referred to Section 7(2) of the IGST Act, which states that goods imported into India are considered inter-state supplies until they cross customs frontiers. Since the goods in question do not cross into India, they are not subject to GST. The transaction is classified as an "exempt supply" under Section 2(47) of the CGST Act, 2017, which includes non-taxable supplies.

Conclusion:

The out & out supplies in the present case are considered "non-taxable supply" as per Section 2(78) of the CGST Act, 2017, meaning they are not leviable to tax under the CGST Act or the IGST Act.

Order:

1. The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.
2. The out & out supplies in the present case are classified as "non-taxable supply" under Section 2(78) of the CGST Act, 2017.