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2021 (10) TMI 146 - AAAR - GSTLevy of GST - international transactions - supply of Hardware by the appellant in the manner commercially known as Merchant Trade Transaction - goods are supplied from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India - Place of supply of goods - N/N. 35/2020-Central Tax dated 03.04.2020, as amended vide Notification No. 55/2020-Central Tax dated 27.06.2020 - HELD THAT - As per the charging section 5 of the IGST Act, 2017, integrated goods and services tax is levied on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption - as per this charging section, integrated goods and services tax is levied on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption. As per clause (a) of sub-section (1) of Section 10 of the IGST Act, 2017, where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient . In the present case, the supply involves movement from the premises of the vendor located outside India to the buyer of the appellant located outside India. Therefore, the place of supply in this case is outside India inasmuch as the movement of goods terminates for delivery at the premises of the buyer located outside India - Section 7 of the CGST Act, 2017 defines the scope of supply. As per clause (a) of sub-section (1) of said section 7, the expression supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. As the transactions of the appellant, wherein the goods are supplied from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India, are covered under Paragraph 7 of Schedule III of the GST Acts, it is evident that the said transactions shall be treated neither as a supply of goods nor a supply of services with effect from 01.02.2019. As such, Goods and Services Tax is not leviable on such transactions with effect from 01.02.2019 - Integrated Goods and Services Tax was payable during the period from 01.07.2017 to 31.01.2019 on supply of goods directly from the vendor s premises located outside India in the non taxable territory to the customer s premises located at another place outside India in the non-taxable territory, without such goods entering into India. However, with effect from 01.02.2019, Integrated Goods and Services Tax is not payable on supply of goods directly from the vendor s premises located outside India in the non taxable territory to the customer s premises located at another place outside India in the nontaxable territory, without such goods entering into India. When a transaction is leviable to IGST / GST in terms of clear provisions of law, the same cannot be held as not liable to IGST / GST merely on the grounds that such transactions were not taxable under erstwhile Indirect Tax Laws or under the United Kingdom VAT legislation or that there is no mechanism to report place of supply of such transaction in GSTR-1 Return. The Integrated Goods and Services Tax was payable from 01.07.2017 to 31.01.2019 and is not payable with effect from 01.02.2019 on supply of goods directly from the vendor s premises located outside India in the non taxable territory to the customer s premises located at another place outside India in the non-taxable territory, without such goods entering into India.
Issues Involved:
1. Whether GST is payable on goods procured from a vendor located outside India when the goods are not brought into India. 2. Whether GST is payable on goods sold to a customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises. Detailed Analysis: 1. GST on Goods Procured from Vendor Located Outside India: The Gujarat Authority for Advance Ruling (GAAR) determined that GST is not payable on goods procured from a vendor located outside India if the goods are not brought into India. This conclusion was based on the definition of "import of goods" under Section 2(10) of the Integrated Goods and Services Tax Act, 2017 (IGST Act, 2017), and other related provisions. The GAAR ruled that since the goods do not enter Indian territory, the transaction does not qualify as an import, and hence GST is not applicable. 2. GST on Goods Sold to Customer Located Outside India: The GAAR ruled that applicable GST is payable on goods sold to a customer located outside India when the goods are shipped directly from the vendor's premises (located outside India) to the customer's premises. The GAAR reasoned that the transaction qualifies as a "supply" under Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), and is treated as an inter-state supply under Section 7(5) of the IGST Act, 2017. The place of supply is outside India, but the supplier is located in India, making it an inter-state supply subject to IGST unless exempted or zero-rated. Appellant's Contentions: 1. Delay in Ruling: The appellant argued that the ruling was pronounced after the mandated 90-day period, rendering it unsustainable and void. 2. Territorial Jurisdiction: The appellant contended that the IGST Act, 2017, extends only within India's territorial jurisdiction. They argued that the levy of GST on merchant trade transactions, where the supply occurs outside India's jurisdiction, is ultra vires. 3. Article 269A of the Constitution: The appellant argued that Section 7(5)(a) of the IGST Act, 2017, is ultra vires as it defines a specific transaction as inter-state without adequate constitutional power. 4. Definition of Export: The appellant argued for a broader interpretation of "export of goods" to include goods delivered outside India, even if not taken from India, aligning with the principle of a consumption-based tax. 5. Circulars and Precedents: The appellant cited CBIC Circulars and previous Advance Rulings to support their claim that GST should not be applicable. Appellate Authority's Findings: 1. Timeliness of Appeal: The appeal was filed within the extended time limit prescribed by Notification No. 35/2020-Central Tax. 2. Levy of IGST: The authority upheld that IGST is levied on inter-state supplies of goods or services, as per Section 5 of the IGST Act, 2017. 3. Place of Supply: The place of supply, as per Section 10(1)(a) of the IGST Act, 2017, is outside India since the movement of goods terminates at the buyer's premises outside India. 4. Supplier's Location: The supplier is located in India, making the transaction an inter-state supply under Section 7(5)(a) of the IGST Act, 2017. 5. Amendment in Schedule III: With effect from 01.02.2019, Paragraph 7 of Schedule III of the CGST Act, 2017, excludes transactions where goods are supplied from a place in the non-taxable territory to another place in the non-taxable territory without entering India from the scope of GST. 6. Retrospective Effect: The amendment does not have retrospective effect. Therefore, IGST was payable from 01.07.2017 to 31.01.2019 but is not payable from 01.02.2019 onwards for such transactions. 7. Constitutional Validity: The authority cannot examine the vires of the law, being a creature of statute. 8. Definition of Export: The statutory definition of "export of goods" under Section 2(5) of the IGST Act, 2017, is clear and cannot be interpreted to include goods not taken out of India. 9. Circulars and Precedents: The cited Circulars and Advance Rulings do not apply to the present issue, and the provisions of the IGST Act, 2017, prevail. Conclusion: The Appellate Authority modified the Advance Ruling to state that IGST was payable from 01.07.2017 to 31.01.2019 on supply of goods directly from the vendor's premises located outside India to the customer's premises located outside India without entering India. From 01.02.2019 onwards, such transactions are not subject to GST.
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