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2019 (2) TMI 194 - AAR - GSTLevy of IGST - removal of goods from the FTWZ unit i.e. the customs bonded warehouse - requirement of registration under IGST - applicability of Circular No.3/1/2018-IGST dated 25th May 2018 - Held that - In the case at hand, the Applicant stores the goods in the FTWZ for which the LSP in the FTWZ, file into bond Bill of Entry with a nominal value. The Applicant on identifying the purchaser, raise commercial invoice and thereafter the DTA purchaser files the ex-bond BOE for the Commercial Invoice value and pays the appropriate BCD and IGST. The invoice price is paid to the applicant by the DTA purchaser - the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse, under the provisions of Customs Act. Circular No.3/1/2018-IGST dated 25th May 2018 was made applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse on or after 01.04.2018. Removal from the FTWZ to DTA is the point of deferred levy/payment of Customs Duty, i.e., at the time of clearance for home consumption from FTWZ. Further, as explained in the Circular, the goods are not to be subjected to IGST when bonded and the payment of integrated tax is to be effected when the goods are removed for home consumption from the bonded warehouse, under the Provisions of Customs Tariff Act. Therefore, there is no requirement to pay IGST under the provisions of GST law at the time of clearance from the FTWZ. Registration - Held that - In the case at hand, the Applicant proposes to effect sale when the goods are bonded and then DTA customer files Bill of Entry for Home Consumption and clears the goods from the FTWZ on payment of appropriate Custom duties (BCD & IGST). Therefore, as clarified in the Circular No.3/ 1/2018-IGST dated 25th May 2018, the payment of IGST again at the point of clearance from the FTWZ to DTA do not arise for supply of warehoused goods, while being deposited in a customs bonded warehouse/FTWZ on or after 01.04.2018. In the event the Applicant is exclusively conducting the activity described in their Application of exporting goods to FTWZ and which are subsequently sold to Indian customers who clear the same on payment of appropriate customs duties, they are not liable to registration under Section 23(1) of CGST Act and TNGST Act.
Issues Involved:
1. Whether the sale of tanned bovine leather stored in a Free Trade Warehousing Zone (FTWZ) by a foreign supplier, which is cleared to a Domestic Tariff Area (DTA) customer in India, is subject to levy under Section 5(1) of the IGST Act 2017, or under the provisions of the CGST Act 2017 or Tamil Nadu GST Act 2017. 2. Whether the foreign supplier, located outside the taxable territory and supplying goods to DTA customers on goods stored in a third-party FTWZ unit, is required to get registered under the IGST Act 2017, CGST Act 2017, or Tamil Nadu GST Act 2017. Detailed Analysis: Issue 1: Levy of IGST on Sale of Goods from FTWZ to DTA The applicant, M/s. Sadesa Commercial Offshore De Macau, specializes in high-quality bovine leather and stores goods in a FTWZ in Chennai. The goods are imported and stored in the FTWZ without payment of customs duties, with the title remaining with the applicant until sold to Indian customers. The key question is whether the sale of these goods from FTWZ to DTA is subject to IGST. The judgment refers to Chapter 7A of the Foreign Trade Policy 2015-2020, which allows duty-free import of goods into FTWZ for warehousing. The goods can be sold in the DTA upon payment of customs duties applicable at the time of sale. The GST Council's 27th meeting clarified that IGST on warehoused goods is payable at the time of clearance for home consumption, not at the time of sale within the warehouse. Circular No. 3/1/2018-IGST dated 25th May 2018, further clarified that integrated tax is levied and collected only when the goods are cleared for home consumption from the customs bonded warehouse. Thus, the removal of goods from FTWZ to DTA is the point of deferred levy/payment of customs duty. The applicant is not liable to pay IGST at the time of removal from FTWZ to DTA, as the integrated tax is collected only at the time of clearance for home consumption. Issue 2: Requirement for Registration under GST Acts The applicant also questioned whether they need to register under the IGST Act, CGST Act, or Tamil Nadu GST Act. The judgment refers to Section 23(1) of the CGST Act, which exempts certain persons from registration. Since the applicant's activity involves exporting goods to FTWZ and selling them to Indian customers who clear the goods on payment of appropriate customs duties, they are not liable for registration under Section 23(1) of the CGST Act and TNGST Act. The ruling confirms that if the applicant exclusively conducts the described activities, they do not need to register under the GST laws. Ruling: 1. The applicant is not liable to pay IGST at the time of removal of goods from FTWZ to DTA under the provisions of the IGST Act, in addition to the duties payable under the Customs Tariff Act, 1975. 2. The applicant is not liable for registration under Section 23(1) of the CGST Act and TNGST Act if they exclusively conduct the activity of exporting goods to FTWZ and selling them to Indian customers who clear the goods on payment of appropriate customs duties.
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