Would like to understand the Tax implication on the transaction, Customs - Exim - SEZ

[Anil kumar]

A is a seller & B is a purchaser. Both are located in India. Now B places order to A for certain material. The shipment will be done from OEM in South Korea to America (as per instructions and address given by B). Now A will raise the invoice to B. I would like to know the tax implication on the above.

Posts / Replies

[PAWAN KUMAR]

As per my view, it will be liable for gst.

[varun reddy]

Maybe it should be subjected to GSY. i m not sure though

[GB Rao]

Dear querist,

GST is an indirect tax applicable on supply of goods or services in India. Here the goods are supplied from South Korea to America. Hence no GST applicable.

[CAVenkataprasad Pasupuleti]

The transaction is covered under SL. No. 7 of schedule III of CGST act, 2017 which excludes the transactions from the definition of 'supply'. Hence, no GST is liable on the transaction explained by you.

[KASTURI SETHI]

Who is acting as 'intermediary' ?

[Srinivasan Krishnamachari]

Not withstanding anything contained in Section 7(1) of the GST Act, which includes all forms of supply, for consideration by a person, for furtherance of business, activities covered under Schedule III will amount to neither supply of goods nor services. As per the serial number 7 added to Schedule III (as the young gentlemen rightly pointed out above in his reply)due to a lot of confusion that prevailed over high seas sales and sales made of goods from one non-taxable territory to another, it was sought to be set at rest the problem once for all. Thank you Sethi Sir, for kind invitation. I trust I have given a reply to my limited knowledge. Other learned members, may like to respond/comment further. 🙏

[Srinivasan Krishnamachari]

K.Srinivasan (IRS)

Sr. Associate, Corporate and Indirect Tax Laws, RANK Associate, Chennai.

[Srinivasan Krishnamachari]

I saw your query Sir. But for intermediary, the goods should either go from India or come to India. Import/Export Agents. Here both are absent. Is my understanding, Sir.

K.S

[KASTURI SETHI]

Sh. Srinivasan Krishnamachari Ji,

Thanks a lot, Sir. My doubts are cleared by your reply.

[KASTURI SETHI]

Sh. Srinivasan Krishnamachari Ji,

Pl. throw more light, sir. 'B' is also not 'intermediary' because he falls in the exclusion clause of definition of Section 2 (13 ) of IGST Act.

"(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

[Srinivasan Krishnamachari]

The POS of services of an import intermediar rendered to the person in non taxing territory, was notionally reversed in 2014 to be the location of the intermediary. By this he became taxable for the commission received from the importer. In the instant case whom is he an intermediary between. He as a buyer has a direct transaction with his Indian seller. Their relationship is two-partite and not tripartite, to contain the presence of an intermediary. Coming to the last part,, subject matter of transaction between the two being goods, moving from one non taxing territory to another, are covered under Schedule III Para 7(Inserted by the 2018 Act),not a taxable supply, despite possessing all other characteristics of a taxable supply as per 7(1) of the GST Act. The non-obstante clause of 7(2) sub-section(1)(a)comes into operation,freeing the subject transaction from taxability. Hope, I have tried to answer to my best understanding,Mr.Sethi, Sir. 🙏

[Srinivasan Krishnamachari]

AAR: No IGST on ‘out and out transactions’ transpiring beyond India’s Customs frontiers from Feb. 01, 2019

Gujarat AAR holds that Applicant is not liable to pay IGST on ‘out and out transactions’ taking place beyond Customs frontiers of India on transactions effected from February 01, 2019 onwards as said activity undertaken by is covered under Entry No.7 in Schedule 3 of CGST Act, 2017 as amended;

[Srinivasan Krishnamachari]

Nonetheless clarifies that Applicable IGST 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 (located outside India) for such transactions effected upto January 31, 2019: Gujarat AAR.

But, despite the late insertion of Para 7 under Schedule III to the GST Act, it lacked taxing jurisdiction, in my humble view. Therefore, the Act amendment dine in 2019,was to keep the rule book straight but could not still ratify an IGST levy, even prior to the said amendment, I would think.

K. Srinivasan (IRS)

Advocate

RANK Associates, Chennai.