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TMI Blog2018 (7) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction in these goods are in the nature of inter-state supply as per Section 7(2) of the IGST Act. In case of goods sold on high seas sale basis there is no levy till the time of their customs clearance in compliance with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act. In view of this the import goods sold on high seas sale basis, though they are clearly in the nature of inter-state supply would come in the category of "exempt supply" as no duty is leviable on them except in accordance with proviso to Section 5(1) of the IGST Act - thus, the goods which are sold on high seas sale basis are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975. Whether input tax credit will have to be reversed, to the extent of inputs, input services and common input services used by the Applicant, in case the above transaction is not subjected to the levy of IGST by treating the same as an exempt supply for the purpose of Section 17 of the CGST Act? - Held that:- The goods sold on High Seas sale basis being non-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Act and the MGST Act are the same except for certain provisons. Therefore, unless a mention is specifically made to such dissimilar provisons, a reference to the CGST Act would also mean a reference to the same provison under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provison under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE OUESTION(S) ON WHICH ADVANCE RULING IS REQURED. 1. BASF India Limited (hereinafter referred to as 'Applicant) having its corporate head office at, 3rd Floor, Shree Sawan Knowledge Park, Plot No D 507, MIDC, Turbhe, Navi Mumbai, India-400 705, is a subsidiary of BASF Germany and is engaged in the business of manufacturing and trading of, inter alia, chemicals and allied products. 2. The Applicant was registered under the erstwhile tax regime, and was discharging excise duty, service tax and value added tax on the manufacture, on commission and sale of the products, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant to its customers for whom the goods were bought by the Applicant its related party Second sale). The customers of the Applicant will be known to them at the time of placing order on the foreign supplier itself. 7. In terms of the proviso to Section 5(1) of the Integrated Goods and Services Tax Act, 2017 ( IGST Act ) on imported Goods IGST Would be levied at the point when duty of Customs becomes payable in terms of Section 12 of the Customs Act and the said IGST would be levied in terms of Section 3(7) of the Customs Tariff Act, 1975 (Customs Tariff Act) 8. However, the sale transaction by the Applicant to the customer also qualifies as an inter-state supply of goods in terms of section 7 of the IGST Act. Therefore, as as this sale is concerned, a question is arising as to whether the said sale of goods will amount to a supply subject to levy of IGST under the IGST Act, when the same goods will once again be subject to a levy of IGST under Section 3(7) of the Customs Tariff Act at the time of importation into India STATMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE IN RESPECT OF QUESTION(S) ON WHICH ADVANCE RULING IS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case is eligible to file the present advance ruling application before the Maharashtra Authority for Advance Ruling, Mumbai, appointed vide Notification No. MGST 1017/CR 193/Taxation dated 24.10.2017 read with Section 99 of Maharashtra Goods and Service Tax Act, 2017. C. APPLICANT'S INTERPRETATION THE SALE OF GOODS MADE BY THE APPLICANT TO THE END CUSTOMER BEFORE THE GOODS CROSSING THE CUSTOMS FRONTIER OF INDIA ON THE BASIS OF A BACK TO BACK PURCHASE ORDER WILL NOT QUALIFY AS A SUPPLY SUBJECT TO LEVY OF IGST C.1 It is submitted that the sale or goods made prior to the customs clearance of the goods cannot qualify as a supply subject to a levy of IGST under the IGST Act. C.2 The relevant provisons under the IGST Act are being reproduced herein as under- 5. Levy and collection . 5. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of importation and at the point when duty of customs under Customs Act is leviable. Therefore, it is submitted that levying IGST once again on sale transactions which have happened prior to the importation of the same goods, does not arise. C. 7 This view of the Applicant has also been fortified vide the Circular No. 33/2017- Cus dated 1.08.2017 issued by the Central Board of Excise Customs, New Delhi. The said circular has also been reproduced under: 1. Reference has been received in the Board regarding clarity on Leviability of Integrated Goods and Services Tax (IGST) on High Sea Sales of imported goods. 2. The issue has been examined in the Board. 'High Sea Sales' is a common trade practice whereby the original importer sells the goods to a third person before the goods are entered for customs clearance. After the High sea sale of the goods, the Customs declarations i.e. Bill of Entry etc is filed by the person who buys the goods from the original importer during the said sale. In the past, CBEC has issued various instructions regarding high sea sales appropriating the contract price paid by the last high sea sales buyer into the Customs valuation [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Only at the time of importation, at the point where the goods are entered for customs clearance will IGST be levied. Therefore, the question of levying IGST on high sea sale of goods before they are entered for customs clearance does not arise, In other words, IGST will be leviable only at the point of importation of goods into India and therefore only once. C.9 In view of the above, it is submitted that no IGST will be leviable on the sale of goods made by the Applicant to its end customer. IGST will be payable only at the time of import and the same will be discharged by the customer at the point when duties of customs will be levied. D. INPUT TAX CREDIT OF THE INPUTS INPUT SERVICES COMMON INPUT SERVICES USED IN CONNECTION WITH THE PROPOSED TRANSACTION DOES NOT HAVE TO BE REVERSED. D.1 The sale of goods by the Applicant to its end-customer before the goods are entered for customs clearance will not qualify as an exempt supply. It is therefore submitted that input tax credit on the inputs, inputs services and common input services used in connection with the said transaction does not have to be reversed_ D.2 Relevant provisons under the Central Goods and Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not be subject to levy of IGST. IGST will be leviable on the said goods only at the point of import into India. E.2 As explained in the above para D, the said supply will not qualify as an exempt supply falling within the purview of the provisons of the IGST Act/CGST Act and thus, ITC reversal will not be required under the provisons of the same. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Question - 1 As Per Proviso to Section 5 of IGST Act regarding levy and collection of-tax which reads as Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975.) on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962. (52 of 1962.) . The same issue was deliberated by GST council vide circular no.33/2017-cus vide Para-4 which reads as The council has decided that IGST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied and coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional Officer, Sh. Rahul Walse, Dy. Commr. of State Taxes (E-619), Large Tax Payers Unit -Il, Mumbai was present on both the occasions and has made written submissions in the matter. 05. OBSERVATIONS We have gone through the facts of the case. The issue put before us is thus - The applicant will be buying products from an overseas supplier who will be the applicant 'srelated party, The said transactions will be at arm 's length pricing. The applicant will be buying the Products from such overseas party against purchase ordersreceived from the applicant's customers in India. It will be a back to back purchase order. As against the purchase order, the overseas party will export the products. The export documents such as the Bill of Lading will show the applicant as the buyer of the goods. Before the goods cross the customs frontier of India and is entered for customs clearance, the goods in question will be sold by the applicant to its customer who are known to them. The sale will be effected by executing a high sea sale agreement and by endorsing the bill of lading in the name of the end customer Sale invoice indicating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms at its sole risk and responsibilities. The buyer shall be responsible for payment of the customs duties, clearing of goods, port expenses, demurrage container charges, octroi, inland transportation and any other related expenses. 6. Post Procedure The Buyer shall hand over to the seller the Original exchange control copy of the Bill of Entry, copy of Customs attested invoice and other documentary proof of having cleared the material from the Customs as are required by the Seller to the Bank and or RBI or any other State or Central Govt. Agency, 7. Sales Tax As the goods are being sold on high sea sales. no central sales tax will be charged under the provison of Central Sales Tax Act and rules thereof However, in the event of any amendments, modifications, notifications to the contrary the liability If any shall be borne by the buyer. 8. Consideration In consideration of this sale, the buyer shall pay to the seller (as per payment terms enumerated above in clause) as detailed below: Sl No. Particulars Amount 1. Cost of Material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of supply are in (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, shall be treated as a supply of goods in the course of inter-State trade or commerce. (2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce. Intra-State supply. 8. (1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply: Provided that the following supply of goods shall not be treated as intra-State supply, namely: (i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit; (ii) goods imported into the territory of India till they cross the customs frontiers of India; or (iii) supplies made to a tourist referred to in section 15. We find that Section 7(2) of the IGST Act reads as under:- (2) Supply of goods imported into the territory of India, till they cross the customs f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electroni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices Tax (CGST) Act, 2017, exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply Further we find that Section 278 of the CGST Act defines non-taxable supply which is as under:- As per Section 2(78) of the Central Goods and Services Tax (CGST) Act, 2017, non-taxable supply means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act Thus it is very clear that the goods which are sold on high seas sale basis are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975. We find that the above legal position is further reiterated and confirmed by Circular No. 3/1/2018 - IGST dated 25.05.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing. Question 2 Whether input tax credit will have to be reversed, to the extent of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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