GST- AAR- objects and extent of IGST/ CGST Act seems not considered by AAR leading to ruling that goods supplied from outside India to customers outside India will also be taxable.

[DEV KUMAR KOTHARI]

GST- AAR- objects and extent of IGST/ CGST Act seems not considered by AAR leading to ruling that goods supplied from outside India to customers outside India will also be taxable.

Advance Ruling discussed:

IN RE: M/S. STERLITE TECHNOLOGIES LTD. [2020 (6) TMI 485 - AUTHORITY FOR ADVANCE RULING, GUJARAT]

GUJ/GAAR/R/04/2020, (In Application No. Advance

Ruling/SGST&CGST/2018/AR/31) Dated: - 17 March 2020

Statutory Provisions which seems not considered – the extent of the Act:

THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017

An Act to make a provision for levy and collection of tax on inter-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto.

Short title, extent and commencement

1. (1) This Act may be called the Integrated Goods and Services Tax Act, 2017.

(2) It shall extend to the whole of India. [***]

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

 Notes:-

1. Omitted vide the Integrated Goods and Services Tax (Extension to Jammu and Kashmir) Act, 2017 no. 27 of 2017, w.e.f. 8-7-2017, before it was read as, "except the State of Jammu and Kashmir."

Similarly objects and extent of CGST Act are as follows:

CENTRAL GOODS AND SERVICES TAX ACT, 2017

THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and the matters connected therewith or incidental thereto.

Short title, extent and commencement.

1. (1) This Act may be called the Central Goods and Services Tax Act, 2017.

(2) It extends to the whole of India. ¹[***]

 

UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017

THE UNION TERRITORY GOODS AND SERVICES TAX BILL, 2017

No. 14 of 2017

Dated: 12th April 2017

An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Union territories and the matter connected therewith or incidental thereto.

Short title, extent and commencement

1. (1) This Act may be called the Union Territory Goods and Services Tax Act, 2017.

(2) It extends to the Union territories of the Andaman and Nicobar Islands, Lakshadweep, ²[Dadra and Nagar Haveli and Daman and Diu, Ladakh], Chandigarh and other territory.

Andhra Pradesh Goods and Services Tax Act, 2017

AN ACT TO MAKE A PROVISION FOR LEVY AND COLLECTION OF TAX ON INTRA-STATE SUPPLY OF GOODS OR SERVICES OR BOTH BY THE STATE OF ANDHRA PRADESH AND FOR MATTERS CONNECTED THEREWITH AND INCIDENTAL THERETO.

 

Short title, extent and commencement.

1. (1) This Act may be called the Andhra Pradesh Goods and Services Tax Act, 2017.

(2) It extends to the whole of the State of Andhra Pradesh.

 

THE WEST BENGAL GOODS AND SERVICES TAX ACT, 2017.

An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the State of West Bengal and the matters connected therewith or incidental thereto.

Short title, extent and commencement.

01. (1) This Act may be called the West Bengal Goods and Services Tax Act, 2017.

(2) It extends to the whole of the State of West Bengal.

Other states:

Preamble and objects of enactments of other states are also on the same line as mentioned above for two states.

Objects:

From reading of the objects of various related enactments for levy of GST, as reproduced above we find that object is  to make a provision for levy and collection of tax on supply of goods or services or both  and the matters connected therewith or incidental thereto,  in different circumstances by concerned governments.

Tax by particular government on supply of goods and services in particular area:

The tax is to be levied on supply in particular area, under different enactments by particular government. For example:

CGST -  on intra-State supply of goods or services or both by the Central Government.

IGST -  on inter-State supply of goods or services or both by the Central Government

 

UTGST-  on intra-State supply of goods or services or both by the Union territories

 

AP state- ON INTRA-STATE SUPPLY OF GOODS OR SERVICES OR BOTH BY THE STATE OF ANDHRA PRADESH.

WB state-  on intra-State supply of goods or services or both by the State of West Bengal

  

Definition of some related words, terms and phrases:

CENTRAL GOODS AND SERVICES TAX ACT, 2017

Definitions.

2. In this Act, unless the context otherwise requires,––

(103) “State” includes a Union territory with Legislature;

(104) “State tax” means the tax levied under any State Goods and Services Tax Act;

(111) “the State Goods and Services Tax Act” means the respective State Goods and Services Tax Act, 2017;

INTEGRATED GOODS AND SERVICES TAX ACT, 2017

Definitions.

2. In this Act, unless the context otherwise requires,––

(1) “Central Goods and Services Tax Act” means the Central Goods and Services Tax Act, 2017;

(2) ‘‘central tax” means the tax levied and collected under the Central Goods and Services Tax Act;

(3) “continuous journey” means a journey for which a single or more than one ticket or invoice is issued at the same time, either by a single supplier of service or through an agent acting on behalf of more than one supplier of service, and which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued.

Explanation.––For the purposes of this clause, the term “stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time;

(4) “customs frontiers of India” means the limits of a customs area as defined in section 2 of the Customs Act, 1962 (52 of 1962.);

(5) “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;

(6) “export of services” means the supply of any service when,––

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange ¹[or in Indian rupees wherever permitted by the Reserve Bank of India]; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

(10) ‘‘import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India;

(11) ‘‘import of services” means the supply of any service, where––

(i) the supplier of service is located outside India;

(ii) the recipient of service is located in India; and

(iii) the place of supply of service is in India;

(12) “integrated tax” means the integrated goods and services tax levied under this Act;

(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods

(21) “supply” shall have the same meaning as assigned to it in section 7 of the Central Goods and Services Tax Act;

(22) “taxable territory” means the territory to which the provisions of this Act apply;

(24) words and expressions used and not defined in this Act but defined in the Central Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts;

Discussion on relevant definitions:

 “State” includes a Union territory with Legislature –

This definition , included in CGST Act, is applicable for other enactments. Though it is  inclusive, yet is limited in scope.

In context of GST, state would mean any State of India and any Union Territory with legislature  in India.  State will not include any foreign land or foreign water.

 IN IGST phrase “taxable territory” means the territory to which the provisions of this Act apply.

As mentioned earlier, the provisions of IGST extend to India.

 

Portion relevant to this article is reproduced with highlights and portion related with other questions are not mentioned:

2020 (6) TMI 485 - AUTHORITY FOR ADVANCE RULING, GUJARAT

IN RE: M/S. STERLITE TECHNOLOGIES LTD.

GUJ/GAAR/R/04/2020, (In Application No. Advance Ruling/SGST&CGST/2018/AR/31)

Dated: - 17 March 2020

 

Whether GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises? - HELD THAT:- The thumb-rule for determining the taxability of any transaction is to ascertain whether the transaction tantamount to 'supply' in terms of the provisions of law - In the instant case, the applicant is selling goods for a consideration in the course or furtherance of business and as such the transaction tantamount to 'supply' in terms of the definition of 'supply'.

In the instant case the applicant has not stated the nature of goods and has not declared that such goods are exempted under any notification issued under the powers of Sec. 11 of the CGST Act, 2017 and the corresponding State Act or Section 6 of the IGST Act. Thus, the only possibility of goods not subject to levy of IGST would be the circumstances where the goods are exported - definition of Export of Goods indicates that the act of taking goods out of India to a place outside India qualifies as export. In the instant case, the goods have not crossed the Indian customs frontier and as such it is clear that the goods are not physically available in the Indian territory. When the goods are not available in the Indian territory, the question of taking goods out of India does not arise. Thus, the subject transaction does not qualify as export of goods.

The transaction is covered under the ambit of Inter-state supply and is neither exempted nor covered under export of services. Thus, the theory of elimination takes us to the conclusion that such supplies will be subject to levy of IGST.

Judgment / Order

MOHIT AGRAWAL AND SANJAY SAXENA, MEMBER

Present for the applicant: Shri Nitin Shah, Advocate

BRIEF FACTS OF THE CASE:

4. The applicant has in their application dated 24.5.2018 raised the following issues for determination before the Authority:-

i) xxx

ii) Whether GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises?

PERSONAL HEARING:

xxxx

14. With regards to the second query regarding leviability of GST on outward supply from place of vendor to customer, it is to mention that the thumb-rule for determining the taxability of any transaction is to ascertain whether the transaction tantamount to 'supply' in terms of the provisions of law. The term 'supply' has been defined at Sec. 7 of the CGST Act, 2017 which reads as under:-

(1) For the purposes of this Act, the expression “supply” includes,-

(a) 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;

(b) import of services for a consideration whether or not in the course or furtherance of business; [and]

(c) the activities specified in Schedule I, made or agreed to be made without a consideration;

In the instant case, the applicant is selling goods for a consideration in the course or furtherance of business and as such the transaction tantamount to 'supply' in terms of the definition of 'supply'.

14.1 Once the test of supply is met with, the next step is to determine whether the same is an Intra-state supply or inter-state supply. In this regard it is pertinent to examine the provisions of Section 7 of the IGST Act, 2017 which reads as under:-

7. (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in,-

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory, shall be treated as a supply of goods in the course of inter-State trade or commerce.

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in,-

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory, shall be treated as a supply of services in the course of inter-State trade or commerce.

(4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.

(5) Supply of goods or services or both,-

(a) when the supplier is located in India and the place of supply is outside India;

(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or

(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.’

14.2 The above statute indicates that in the event that the supplier is located in India and the place of supply is outside India, such supplies shall be treated as Inter-stated supplies. The place of supply in the instant case would be governed by the provisions of Sec. 10 of the IGST Act, 2017 of which the relevant text reads as under:-

10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,-

a) 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 instant case, it is an undisputed fact that the supply involves movement of goods and therefore the place of supply would be the termination for delivery to the recipient. The goods under consideration are supplied to overseas buyers as declared by the applicant and as such the place of supply will be a place outside India. Further, the supplier is the applicant who has declared the principal place of business within India and issues the invoices for sale of such goods.

14.3 The above indicates that the supplier is located in India and the place of supply is outside India and as such the same would be Inter-state supply in terms of the provisions of Sec. 7(5) of IGST Act, 2017. Thus, it is very clear that the transaction undertaken by the applicant tantamount to supply and is an Interstate supply. Having travelled thus far, it is obvious that IGST will be leviable unless the goods are exempted or are zero-rated supplies which have been defined as export of goods or services in terms of the provisions of Sec. 16 of the IGST Act, 2017. In the instant case the applicant has not stated the nature of goods and has not declared that such goods are exempted under any notification issued under the powers of Sec. 11 of the CGST Act, 2017 and the corresponding State Act or Section 6 of the IGST Act. Thus, the only possibility of goods not subject to levy of IGST would be the circumstances where the goods are exported.

14.4 The term 'export of goods' has been defined under sub section 5 of Section 2 of IGST Act, 2017 which reads as under:-

Export of goods would mean- 'With its grammatical variations and cognate expressions, means taking goods out of India to a place outside India'.

The above definition indicates that the act of taking goods out of India to a place outside India qualifies as export. In the instant case, the goods have not crossed the Indian customs frontier and as such it is clear that the goods are not physically available in the Indian territory. When the goods are not available in the Indian territory, the question of taking goods out of India does not arise. Thus, the subject transaction does not qualify as export of goods.

14.5 In view of the above, it appears that the transaction is covered under the ambit of Inter-state supply and is neither exempted nor covered under export of services. Thus, the theory of elimination takes us to the conclusion that such supplies will be subject to levy of IGST.

15. In view of the above discussions, we rule as under;

RULING

 GST is not payable on goods procured from vendor located outside India, where the goods so purchased are not brought into India?

ii) Applicable GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises

 

Observations of author:

As discussed above the applicant has not raised legal issue about object and extent of IGST Act read with CGST Act. It must have been mentioned and  emphasized that GST under various laws is on sale of goods or services in India and not out of India.

The applicant did not state about any exemptions applicable, as noted by the AAR.

Therefore, the Ruling has been decided in view of statements in application and submissions during personal hearing.

The goods of supplier  were outside India, means that either goods were sent from India or procured out of India. If goods were sent from India, then there was export from Indian sources to warehouse out of Indian. However, this contention was apparently not raised.

If goods were procured from sources outside India and warehoused out of India for sale out of India, then the goods never came to India so there was no import and there was no export from India rather it was a case of high seas sale.

It seems that due to lack of clarity and completeness of application and arguments during personal hearing, the decision has gone against the supplier.

Discussions to this article

[Ganeshan Kalyani]

Sir, a statement should be True or False. But, taxation is different. The answer depends upon the convincing power of the party. If one has that power the statement will be True otherwise False.

[YAGAY andSUN]

It is an appealable order/Ruling, therefore an appeal against it must be filed for the sake of clarity and justice.

[SANJAY MALHOTRA]

A new area of litigation surfaces with this AAR ruling.