2019 (10) TMI 1138 - AAR - GST

Levy of GST - Applicant supplies foreign going vessels stores like paint, rope, spare parts, electronic equipment etc. - zero-rated supplies or not? - HELD THAT - The supplier there is supplying warehoused goods as stores to the merchant ships on the foreign run where the goods are not to be consumed until the vessel crosses the territorial waters of India. In other words, the foreign going vessel is merely transporting the stores until it reaches a location outside India. Facts of the Applicant s case are not similar or that specific. Foreign going vessels obtain stores and spare parts while staying anchored at a port in India. There is no reason why the part of such stores that the crew consume or is used for repairing or servicing of the vessel while in India should be treated as export. The Applicant s supply of stores to foreign going vessels, as defined under section 2(21) of the Customs Act, 1962 Act, is not export or zero-rated supply, unless it is marked specifically for a location outside India - The Applicant is, therefore, liable to pay tax on such supplies under the GST Act or the IGST Act.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant and the Revenue
3. Observations & findings of the Authority

Admissibility of the Application:
The Applicant sought a ruling on the tax liability for supplying stores to foreign going vessels and whether such supplies are zero-rated. The application was admitted as the question raised fell under Section 97(2)(e) of the GST Act and had not been decided by any authority under the CST Act. The concerned Revenue officer did not object to the admission.

Submissions of the Applicant and the Revenue:
The Applicant argued that provisions of the IGST Act and the Customs Act indicate that supplying stores to foreign going vessels qualifies as export and zero-rated supply. Reference was made to a ruling by AAR, Andhra Pradesh, supporting this view. The Revenue officer concurred with the Applicant's interpretation.

Observations & findings of the Authority:
The Authority analyzed the definitions and provisions of the Customs Act regarding warehoused goods and their export. It was determined that supplying stores to foreign going vessels does not constitute export unless specifically marked for a location outside India. The Authority highlighted the distinction between export under the Central Sales Tax Act and the IGST Act, emphasizing the narrower scope of export under the latter. The ruling of AAR, Andhra Pradesh, was deemed irrelevant as the Applicant's case differed significantly. Ultimately, the Authority ruled that the Applicant's supply of stores to foreign going vessels is not zero-rated unless designated for a location outside India, making the Applicant liable to pay tax under the GST or IGST Act.

In conclusion, the Authority clarified that unless the stores supplied to foreign going vessels are expressly marked for a location outside India, such transactions do not qualify as zero-rated supplies. The judgment emphasized the specific criteria for export under the GST and IGST Acts, highlighting the need for a distinct provision to exempt imported stores supplied to foreign going vessels from tax liability. The ruling provided a detailed analysis of the legal framework and previous decisions to support the decision, ensuring clarity on the tax implications of supplying stores to foreign going vessels.