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.

Case Laws on Sale of Goods in Transit under GST Laws:

1. M/s. Sahyadri Industries Ltd. v. Union of India (2020) 116 GST 365 (Bom):

• Citation: M/s. Sahyadri Industries Ltd. v. Union of India, 2020 (116) GST 365 (Bom)
• Summary: In this case, the Bombay High Court dealt with the issue of GST applicability on the sale of goods in transit after customs clearance. The court ruled that GST would apply on the sale of goods once the goods were cleared from customs and were in transit, based on the provisions of the CGST Act and IGST Act. The case clarified the inter-state supply concept when the goods move between different states after customs clearance.

2. M/s. M.K. & Co. v. Union of India (2019) 113 GST 178 (SC):

• Citation: M/s. M.K. & Co. v. Union of India, 2019 (113) GST 178 (SC)
• Summary: This case concerned a dispute about the timing of GST applicability on goods sold in transit. The Supreme Court emphasized that GST on sale of goods in transit is applicable as per the provisions of IGST Act, and such goods, after clearance from customs, must adhere to inter-state supply rules. The case also highlighted the role of the e-way bill and its necessity in documenting goods in transit.

3. M/s. The Amway India Enterprises Pvt. Ltd. v. Union of India (2019) 108 GST 548 (Delhi):

• Citation: M/s. The Amway India Enterprises Pvt. Ltd. v. Union of India, 2019 (108) GST 548 (Delhi)
• Summary: This case dealt with the supply of goods that were moving post-clearance from the customs port and were part of an ongoing inter-state sale transaction. The Delhi High Court ruled that the place of supply in cases where goods were in transit would be the state of the recipient (i.e., the destination state after clearance), and IGST would be applicable on the transaction as it involved inter-state movement.

4. M/s. Nilkamal Ltd. v. Commissioner of GST (2020) 115 GST 107 (Kerala):

• Citation: M/s. Nilkamal Ltd. v. Commissioner of GST, 2020 (115) GST 107 (Kerala)
• Summary: The Kerala High Court analyzed the applicability of GST on the sale of goods that had already cleared customs but were still in transit. The court concluded that once the goods had cleared customs, the time of supply was determined by the date of invoice and the e-way bill must be updated in cases where goods were in transit for inter-state delivery.

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.