2019 (11) TMI 715 - AAR - GST

Levy of GST - Zero rated supply or not - supply of foreign going vessels stores like paint, rope, spare parts, electronic equipment etc. - HELD THAT - A foreign going vessel anchored within the territory of India is not a place outside India and taking the stores on board such a vessel does not amount to supply to a location outside India. Section 69 of the 1962 Act cannot, therefore, cover within the ambit of export the case where the warehoused goods are taken on board a foreign going vessel. A special provision needs to be made under section 88(a) of the 1962 Act to extend the facility of exemption from import duty to such imported stores. The Applicant does not claim that its supplies of stores to the foreign going vessels are restricted to warehoused goods. In any case, at the time of supply, both the supplier (the Applicant) and the recipient (the foreign going vessel) are located in India. The supply of stores imported or otherwise, to foreign going vessels cannot, therefore, be construed as export unless it is marked specifically for a location outside India. It is not a zero-rated supply. The Applicant is, therefore, liable to pay tax on such supplies under the GST Act or the IGST Act, as the case may be - However, the Applicant s supplies to the foreign going vessels shall be treated neither as a supply of goods nor services in terms of paragraph 8(a) of Schedule III under section 7(2)(a) of the GST Act if such stores are warehoused goods supplied to the recipient before clearance for home consumption.

Summary

Issues:
1. Admissibility of the application
2. Interpretation of the provisions of the IGST Act and the Customs Act regarding supplies to foreign going vessels

Issue 1: Admissibility of the Application
The Applicant sought a ruling on the liability to pay tax on supplies to foreign going vessels, specifically inquiring about zero-rated supplies. The Authority found the application admissible under Section 97(2)(e) of the GST Act and admitted it as the question raised had not been previously decided by any authority.

Issue 2: Interpretation of the provisions of the IGST Act and the Customs Act regarding supplies to foreign going vessels
The Applicant argued that supplies to foreign going vessels constitute exports and zero-rated supplies under the IGST Act when read with the Customs Act. The Authority examined the definition of warehoused goods and the provisions related to export under the Customs Act. It concluded that supplies to foreign going vessels do not qualify as exports unless specifically marked for a location outside India. The Authority highlighted that the location of the supplier and recipient being in India during the supply does not meet the criteria for export. The ruling stated that such supplies are not zero-rated unless marked for a location outside India.

Amendment and Rectification:
The original ruling did not discuss the status of supplies of warehoused goods to recipients before clearance for home consumption. The Authority, under section 102 of the GST Act, rectified the order to include this aspect. It clarified that such supplies, if covered under paragraph 8(a) of Schedule III under section 7(2)(a) of the GST Act, would not be treated as supplies of goods or services, exempting them from tax liability unless specifically marked for a location outside India.

This comprehensive analysis of the judgment covers the issues of admissibility of the application and the interpretation of relevant provisions concerning supplies to foreign going vessels under the GST Act and the Customs Act.