IRN -for bill to a foreign customer ship to same GSTIN or different GSTIN, Goods and Services Tax - GST

[Ramaswamy S]

The tools are billed to a foreign customer. the tools are retained in the factory for use in the manufacture of components for the same customer. The customer pays in FC. As per Law, CGST+SGST to be charged as there is no movement of goods. The e-invoice portal does not allow to generate IRN for such transactions.

As per the FAQ, e-invoice is applicable only to B2B (registered persons) including exports.

In this scenario, the customer is not registered being outside India.

Please let us know how to generate IRN.

If IRN is not required to be generated, then how to show it in GSTR-1.

Request the experts advise.

Posts / Replies

[ABHISHEK TRIPATHI]

As retaining the tools for making the final product in light of the symbolic transfer of ownership, prima facie seems extremely cumbersome model for tax planning.

Notification 70/2020 Central tax dated 30.09.2020 has brought export also under the ambit of e-invoices. As per the business model, the company has to raise the invoice on the symbolic transfer of ownership, thus, the company may try filing the details of Recipient as URP.

You may refer few videos for understanding how to generate e-invoices for export.

"Views are extremely academic in nature."

[Ramaswamy S]

Dear Sir,

Thank you for the reply. As per the GST (and also per judicial decisons), the transaction is held as not an export transaction. Hence GST is chargeable.

e-invoice portal does not allow to generate IRN if the Supplier GSTIN and buyer/ ship to GSTIN is the same.

Would request advise

[ABHISHEK TRIPATHI]

As in your case, the assessee is billing the tools to Foreign Customer, while keeping the tools for further manufacturing the final product. Billing the client means you are supplying the tools to them at that stage and therefore, transfer of ownership. Thats symbolic transfer of ownership, though the goods (tools) are still in India. If you want to raise an invoice at the tooling stage then you have to consider, symbolic transfer of ownership hence, export. And then use URP as the recipient (without inserting the GSTIN), consider the transaction to be export of goods on account of symbolic transfer of goods (Eventually assessee cannot keep the tools, he has to send it to the FC or dispose off on the direction of the FC).

May consider a different business model in these cases of design, tooling and making final product because the above view may be highly contentious by the department. You have rightly pointed that few rulings and even department has viewed this not to be an export. Logically, if this is not an export then assessee is supplying the tools to whom? Assessee just cannot supply the tools to themselves and make the final product, in such a case the assessee doesn’t even have to raise an invoice.

A proper legal opinion should be taken for all these business model. Otherwise department may create unnecessary pain.

[Alkesh Jani]

Shri

My views for the given facts of the issue is as follows:-

1. As the goods have not cross the border of India, it cannot be said as “Export of goods”.

2. The tools which are received for manufacturing the components are retained may be treated as supplied by the recipient, the foreign buyer. The cost recovered by you may be treated as cost of the recipient for manufacturing components and the value of the same is to be added while supplying the components (Please refer Valuation provisions). It is merely reimbursement for the tools. No ITC can be taken for tools as transfer of title of goods has already taken place.

[Ramaswamy S]

Dear Sir,

Thank you for the reply. The question is e-invoice portal is not allowing to generate IRN for such transactions where the GSTIN of the seller and the GSTIN of the ship to is the same.

The IRN is to be generated before filing the GSTR-1 for the month (the invoice is already raised) and the tax is to be paid for the month.

[ABHISHEK TRIPATHI]

From the previous post
(Eventually assessee cannot keep the tools, he has to send it to the FC or dispose off on the direction of the FC). Lot of situation and arrangement will make it export anyway plain reading and simple arrangement, yes not an export.

How the foreign customer supply the tools? To get a supply from him, there should be a situation in which the assessee is supplying the tools to FC? You just cannot make the tools and say that the FC has supplied it to you.

Assessee should raise an invoice of final product (including tooling charges). To cover your tooling expenses, consider taking advance from the FC. These kind of model change is required.

[ABHISHEK TRIPATHI]

How GSTIN is same ?

[Ramaswamy S]

GSTIN of the ship to and the GSTIN of the supplier is the same because the tools are retained. The Bill to (customer) is a foreign buyer and no GSTIN.

GSTIN ( Supplier) - X

GSTIN (Bill to - foreign buyer) - Nil

GSTIN (Ship to - Supplier ) - X

[Ramaswamy S]

Dear Sir,

Treated as domestic supply only to a foreign customer. CGST + SGST is charged on the GST invoice (not on commercial invoice). e-invoice portal is not allowing to generate IRN for this transaction where the buyer is a outside India (Bill to), and CGST+SGST is charged (as ship to).

[Shilpi Jain]

e invoice presently required only for B2B supplies and exports. The present transaction is neither of them. So no e-invoice required.

Please check requirement of generating Dynamic QR code. Also refer to the latest circular in this aspect. 146/21 dated 23.3.21

[Ramaswamy S]

thank you