Supply from sez to bonded warehouse, Other Topics

[RAKESH JAIN]

Sir, needs ur advise on the under Transaction Details:

1. Our SEZ unit has sold goods to a foreign buyer against payment in freely convertible foreign currency.

2. As per the foreign buyer’s instructions, the goods are to be delivered and stored in a bonded warehouse in India, which is duly notified under Section 60 of the Customs Act, 1962.

3. The foreign buyer retains ownership of the goods while they remain stored in the bonded warehouse.

4. Subsequently, the foreign buyer sells the goods to an indigenous buyer in India, with payment also received in freely convertible foreign currency.

5. The indigenous buyer will take delivery from the bonded warehouse after making the necessary customs duty and IGST payments for clearance.

Clarification Sought:

In view of the above transaction, we request clarification on whether the initial sale made by our SEZ unit to the foreign buyer should be classified as:

a) DTA Sale,

b) Deemed Export, or

c) Physical Export under SEZ and Customs regulations.

Posts / Replies

[YAGAY andSUN]

Based on the details you've provided about the transaction, here's a breakdown of how the sale should be classified under SEZ and Customs regulations:

Classification of the Initial Sale by SEZ Unit to Foreign Buyer:

1. DTA Sale: A DTA (Domestic Tariff Area) sale refers to the sale of goods from an SEZ unit to a domestic buyer within India. In this case, the goods are initially sold to a foreign buyer, not a domestic buyer, so this does not qualify as a DTA sale.

2. Deemed Export: Deemed export refers to transactions where goods are considered exported under certain circumstances, even if they are not physically shipped out of the country. For a sale to qualify as deemed export, there must typically be a situation where the goods are not consumed in India and are either cleared from the SEZ to a bonded warehouse or used in certain specified ways. However, in this scenario, while the goods are delivered to a bonded warehouse in India, they are not considered "exported" to a foreign entity in the traditional sense but are rather temporarily stored in India for future sale to a domestic buyer. Thus, this scenario does not fall squarely under deemed export.

3. Physical Export under SEZ and Customs Regulations: A physical export involves goods being shipped out of India to a foreign buyer. In this case, although the foreign buyer retains ownership of the goods and the transaction involves foreign currency, the goods are not physically exported from India. Instead, they are stored in India in a bonded warehouse. Therefore, this should be classified as neither a physical export under SEZ and Customs regulations.

Conclusion:

The sale made by your SEZ unit to the foreign buyer should be classified as Deemed Export under SEZ and Customs regulations. This is because, while the goods remain in India (in a bonded warehouse), they are being temporarily stored for onward sale to an indigenous buyer. The fact that the foreign buyer retains ownership of the goods and the transaction is in foreign currency also supports the Deemed Export classification. However, this may also depend on further specifics, so it’s advisable to consult a tax or customs expert for a more tailored and precise interpretation based on your situation.

Feel free to ask for further clarifications if you need!

[Sadanand Bulbule]

Refer Section 147 of the CGST Act: Deemed Exports. 147. The Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured in India.  Also refer CGST Notification No.48/2017 – Central Tax dated 18th October 2017

[Sadanand Bulbule]

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF EXCISE AND CUSTOMS)

NOTIFICATION No. 48/2017–Central Tax

New Delhi, the 18th October, 2017

G.S.R.1305 (E).-In exercise of the powers conferred by section 147 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the supplies of goods listed in column (2) of the Table below as deemed exports, namely:-

Table

S. No.	Description of supply
(1)	(2)
1.	Supply of goods by a registered person against Advance Authorisation 1[Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply,; Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in manufacture of export goods.]
2.	Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
3.	Supply of goods by a registered person to Export Oriented Unit
4.	Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation.

Explanation -

For the purposes of this notification, –

1. “Advance Authorisation” means an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import or domestic procurement of inputs ²[*******] for physical exports.

2. Export Promotion Capital Goods Authorisation means an authorisation issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015-20 for import of capital goods for physical exports.

3. “Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-Technology Park Unit approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015-20.

[F. No. 349/58/2017-GST(Pt.)]

GUNJAN KUMAR VERMA, Under Secy.

[RAKESH JAIN]

Thanx for the clarification. 

Will be kind if can suggest any relevant circular/notification/instruction of DGFT/SEZ/customs for considering this transaction as DEEMED EXPORT and counted under total exports (deemed + physical) for NFEE ( net foreign exchange earning) for sez unit

[Sadanand Bulbule]

 Refer Discussion Issue Id: - 118293 Dated: 18-12-2022