Sale of part of Imported Goods in Trnasit, Goods and Services Tax - GST

[deepak gulati]

We are registered at Rajasthan. We are importing goods at Nava Shera, Mumbai. It is a container load (10000Kgs). We are taking delivery at Nava Shera and goods are dispatched to Rajasthan. During transit, part of goods are sold and offloaded (3000Kgs) at Mumbai and rest goods (7000Kgs) comes to Rajasthan. For goods sold in Mumbai, we prepare an invoice from Rajasthan charging IGST. For remaining goods, we are preparing a delivery challan from Nava Shera to Rajasthan.

In light of above, please let us know :

1. Whether the process adopted is correct?
2. Can we sell imported goods in transit in Mumbai and bring balance to Rajasthan?

Posts / Replies

[Sadanand Bulbule]

Dear

Once the goods are cleared from the Customs Authorities after payment of Customs Duty and IGST, they do not remain as "imported goods". Rather they are domestic goods like any other goods. So you can sell such goods to anyone on par with domestic goods as per the provisions of the GST Act, particularly Tax Invoice and E-way bill to be taken care of with caution to avoid trouble in transit.

[KASTURI SETHI]

I concur with the views of Sh. Sadanand Bulbule, Sir.

As per Section 2 (25) of the Customs Act, "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;

Although in common parlance we call such goods as "imported goods ' yet these are no longer, "imported goods" after clearance from the Customs Station.

[YAGAY andSUN]

Under Goods and Services Tax (GST) Laws in India, the sale of goods in transit after clearance from the customs port is a scenario that involves both the Customs Act, 1962 and the GST Act, 2017. The primary concern in such situations is to determine when the supply of goods occurs and when GST becomes applicable, as the goods have already passed customs clearance.

Provisions under GST Laws for Sale of Goods in Transit:

1. Supply of Goods and Time of Supply:

   • Under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, the definition of “supply” is wide and includes the sale of goods. A supply of goods can include goods sold after they have cleared customs but are still in transit.
   • Section 12 of the CGST Act deals with the time of supply of goods. The time of supply generally is the earliest of the following:
     • The date of issue of invoice by the supplier.
     • The date on which the payment is made.
     • In cases where goods are sold in transit, the time of supply could be influenced by the movement of goods and the associated invoice.

2. Movement of Goods and GST Implications:

   • When goods are in transit, GST becomes applicable upon the completion of the sale. If the goods are being moved to a different location (post-clearance from customs), GST will be applicable based on the destination state (for inter-state sales) or the location of the buyer (for intra-state sales).
   • According to Section 10 of the IGST Act, the sale of goods in transit (i.e., goods that are moving from one place to another after customs clearance) will be treated as an inter-state supply if the buyer and seller are in different states. The Integrated GST (IGST) will be applicable in such cases.

3. Invoice and Documentation Requirements:

   • Once goods are cleared from customs and are in transit, the GST invoice should be issued. The seller must ensure that the invoice is raised either at the time of dispatch or delivery of the goods to the buyer.
   • The GST portal mandates that the Goods Receipt (GR) or e-way bill should be updated if the goods are being transported to a different location or state.

4. Place of Supply:

   • The place of supply for goods in transit is determined under Section 10 of the IGST Act. If goods are being transported to another state post-clearance from customs, the place of supply will be the state where the goods are delivered.

5. Customs Duty and GST Nexus:

   • Customs duties are paid at the time of customs clearance of goods. After this, GST on the sale of goods in transit is determined by the nature of the supply (intra-state or inter-state).
   • Customs clearance ensures that no further customs duties are applicable when the goods are moved out of the customs area, but GST will still apply as per the provisions of the GST Act.

Conclusion:

The sale of goods in transit after customs clearance is treated under GST laws as a supply of goods, with IGST applicable in inter-state transactions and CGST/SGST for intra-state transactions. The timing of the supply depends on the issuance of the invoice or the movement of goods, and the place of supply is determined by the destination of the goods.

Key points:

• GST applies to goods after customs clearance.
• Inter-state movement results in IGST; intra-state movement results in CGST/SGST.
• Court cases have clarified that sale in transit triggers GST, governed by the place of supply and the timing of supply provisions.

[raghunandhaanan rvi]

I agree with the views of Shri.Sadanand Bulbule ji.

[deepak gulati]

Sir With due respect, 

For better clarity please through some light on the following questions:-

1) After import can we move material in 2 parts without having a registration in Maharashtra

2) If yes, will there be any trouble during transit of 7000kgs being taken to Rajasthan on cover of inward delivery challan and corresponding e-way bill for  7000kgs

Thanks in advance

[raghunandhaanan rvi]

In my view there won't be any issues if you are a GST regitrant 

[Yash Shah]

According to section 31(1) of CGST Act 2017, A registered person supplying taxable goods shall issue a tax invoice, before or at the time of removal of goods for supply to the recipient, where the supply involves movement of goods.

Further as per rule 55(1) of CGST rules 2017, delivery challan can be issued in case of inter alia transportation of goods for reasons other than by way of supply.

As per section 10(1)(a) of IGST Act 2017, POS of goods in case of supply involving movement of goods shall be place where movement of goods terminates.

As per section 7 of IGST Act 2017, where the location of the supplier and the POS are in two different states then this shall be treated as a supply of goods in the course of inter-State trade or commerce.

According to section 2(25) of the Customs Act 1962, "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.

Further as per section 12(1) of Customs Act 1962, customs duties shall be levied on goods imported into, or exported from, India.

Query 1:- As per section 31(1) of CGST registered person registered in Rajasthan needs to issue a tax invoice for the supply of goods (3000Kgs) at Mumbai for which POS will be the Mumbai (as per section 10(1)(a) of IGST) and will results in inter-State supply of goods (as per section 7 of IGST) for which IGST shall be charged. Further for the remaining goods (7000Kgs) transporting from Nava Shera to Rajasthan delivery challan needs to be issued (as per rule 55(1) of CGST rules)

Therefore the process adopted in the given case is correct and is according to the provisions of the GST law.

Query 2:- In the given case goods (10000Kgs) are cleared from the port therefore it will not qualify as imported goods (as per section 2(25) of the Customs Act) and since customs duties are levied only on goods imported into, or exported from, India therefore customs duties will not be levied once goods cleared from port for home consumption.

Since there is no relation of the Customs Act in the given case after goods has been cleared and also there is no restriction for selling goods in transit in GST laws and its rules, therefore goods once cleared from port for home consumption can be sold in transit.

[deepak gulati]

Yash jee

Thanks for a very comprehensive reply, I appreciate it.

The only issue is, the verification of the Vehicle in Transit, Four states are involved in Transit and officers on the Road do not want to understand the part shipment and also the charging of CGST on the Inward Delivery challan. They only have one aim, how to find fault. A very sad state for TP.

[Shilpi Jain]

Thats the sad state of affairs w.r.t. the officers on the road checking EWB compliances. Though, its clear that you can divert the goods from Mumbai without having any registration there and move the rest on DC.

Ensure you have a copy of the BoE and the invoice issued for the sale / transfer made at Mumbai to show to the officer in case of the movement from Mumbai to Rajasthan.