2023 (3) TMI 1116 - AAR - GST

Classification of supply - Supply of goods or supply of services - zero rated supply or not - supply of goods from the Applicant to the overseas customer - HELD THAT - There are two transactions involving the applicant. The first transaction is of supply of goods by the manufacturer to the applicant and the second transaction is of supply of the same goods by the applicant to an overseas customer - As per the agreement with the applicant, the Indian manufacturer undertakes to supply the goods and complete all the export compliances including filing of Shipping Bill as an exporter and also receives Bill of Lading from shipper. The person claiming 'exporter' is the owner of the goods, and also the bill of lading is proof of title of goods when the goods are handed over to the shipper. Since the manufacturer files the shipping bill as exporter and also gets the bill of lading issued to him, he is the owner of the goods and holds the title of goods till they cross the customs frontiers of India. In effect the manufacturer takes the goods out of India to a place outside India while he is holding ownership and title of the goods, i.e., he exports the goods in terms of Section 2(5) of the IGST Act, 2017. Thus the manufacturer is the exporter of goods. Therefore in the first transaction of supply of goods by the manufacturer to the applicant, the place of supply of goods shall be the location outside India in terms of Section 11(b) of the IGST Act, 2017. In respect of the second transaction involving the supply of the same goods by the applicant to overseas customer, it is observed that the goods are supplied from a location outside India to a location outside India, i.e., the supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. The said transaction is covered under Entry 7 of Schedule III of CGST Act, 2017 as a transaction or supply which shall be treated neither as a supply of goods nor a supply of services. The supply of goods from the Applicant to the overseas customer is treated neither as supply of goods nor as supply of services.

Issues Involved:
1. Whether the supply of goods from the Applicant to the overseas customer is taxable under GST as a zero-rated supply or not.
2. Admissibility of the application under Sections 97(2)(e) of the CGST Act 2017.

Summary:

Issue 1: Taxability of Supply of Goods as Zero-Rated Supply

The applicant, a Private Limited Company registered under CGST/KGST Act 2017, is engaged in trading finished goods and providing support services to customers outside India. They intend to supply domestically procured goods to customers outside India. The applicant sought an advance ruling on whether this supply is taxable under GST as a zero-rated supply.

Facts:
- The overseas customer issues a purchase order to the applicant, who then places an order with a domestic manufacturer.
- The Indian manufacturer is responsible for customs duty compliances and ships the goods directly to the overseas customer.
- Two invoices are raised: one from the Indian manufacturer to the applicant and another from the applicant to the overseas customer.
- Payment is received in convertible foreign currency, and the applicant records the transactions as 'purchase of goods' and 'sale of goods' in their books.

Applicant's Interpretation:
- The applicant argued that the transaction qualifies as an "export of goods" under Section 2(5) of the IGST Act 2017, as the goods are taken out of India to a place outside India.
- They contended that this should be treated as a zero-rated supply under Section 16 of the IGST Act 2017.
- Alternatively, they argued that if the transaction is not considered an export, it should fall under Entry 7 of Schedule III of the CGST Act 2017, which treats it as neither a supply of goods nor services.

Authority's Findings:
- The Indian manufacturer, who files the shipping bill and receives the bill of lading, is considered the exporter as per Section 2(20) of the Customs Act 1962.
- The manufacturer holds the title of goods until they cross the customs frontiers of India, making them the exporter under Section 2(5) of the IGST Act 2017.
- The place of supply for the first transaction (manufacturer to applicant) is outside India as per Section 11(b) of the IGST Act 2017.
- The second transaction (applicant to overseas customer) is from a location outside India to another location outside India, covered under Entry 7 of Schedule III of the CGST Act 2017, and is treated neither as a supply of goods nor services.

Ruling:
The supply of goods from the Applicant to the overseas customer is treated neither as a supply of goods nor as a supply of services.

← Previous Next →