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TMI Blog2018 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... tion takes place applicant transfers the ownership of the goods to Indian customer by way of sale. In this case also the goods remain under the possession of Schaeffer Germany. In short, the order received by the applicant from their customer in India and the order placed by applicant On Schaeffer Germany is in the nature of back to back order. Inter-state sale or intra-state sale - Held that:- Supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce - in the present case, the location of the applicant as a supplier of goods is in India and the place of supply of goods is outside India i.e. Germany and such impugned transaction get clearly covered by the scope of section 7(5) (a) of the Act. As a result the transaction is in the nature of interstate trade and commerce. From the harmonious reading of Section 7(2) and Section 7(5)(a) of the IGST Act, it is clear that the transaction referred to as T2 gets covered under the ambit of Interstate trade and commerce. And thus liable to tax as per Section 5 of the IGST Act. Levy and collection of GST - Held that:- As per Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient, to whom such goods are sold, be eligible to avail the input tax credit of such goods? At the outset, we would like to make it clear that the provisions of both the CGST Act and the GST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the COST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS AS PROVIDED IN ANNEXURE 1 Brief Background of the Transaction: * INA Bearings India Private Limited (hereinafter referred to as 'Applicant') is engaged in supply of bearings and tools. The Applicant supplies bearings to a wide range of customers which inter-alia include Original Equipment Manufacturers (OEM). * It is pertinent to note that for manufacture of bearings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Statement containing the applicant's interpretation of law and/or facts. as the case may be. in respect of the questions(s) on which advance ruling is required A. Levy of IGST cannot be extended beyond territorial jurisdiction of the said legislation. Evaluating IGST provisions to understand possibility of levying IGST A1. With reference to facts of the applicant summarized in Annexure 2, the transaction of supply of tool to customer in India by Applicant needs to be evaluated in terms of IGST Act to understand nature of transaction and to evaluate applicability of IGST. A2. Section 7 of IGST Act, 2017, lays down the principles to determine nature of transaction as inter-state transaction. In this regard, attention is invited to provision of section 7(5) which reads as under: '(5) Supply of goods or services or both,-- (a) when the supplier is located in India and the place of supply is outside India; (b) to or by Special Economic Zone developer or a Special Economic Zone unit: or (c) in the taxable territory', not being intra-Stale supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate supplies of goods or services or both in terms of Section 5 of IGST Act. From the conjoint reading of abovementioned provisions, it appears that T2, could get covered within the purview of 'Inter-State supply' and hence could become liable to IGST. A5. However, Applicant intends to draw your kind attention to section 1(2) of IGST Act which determines the extent of applicability of IGST Act. As per the said section IGST Act extends to whole of India except State of Jammu and Kashmir. 'India' has been defined in section 2(56) of CGST Act read with section 2(24) of IGST Act to mean 'the territory of as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters;' A6. Hence, Applicant wishes to contend that scope of IGST Act is limited to territorial jurisdiction ta which it extends. Thus, IGST levy can be introduced only to supplies within the territorial jurisdiction of the IGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. ………' B3. From the above, itis quite clear that Article 269A enables levy and collection of GST for supplies in the course of inter-state trade of commerce. An explanation has been inserted stating that import transactions will also be considered as inter-state supply of goods or services or both. If we consider the common parlance an inter-state transaction would mean transaction effected between two states and or union territories. It would be important to note that the Constitution has not defined the above transaction that is, where the supplier is located in India and the place of supply is outside India to be an inter-state supply. The provisions of section 7(5)(a) is ultra vires since the law has defined a specific transaction to be an inter-state supply without having adequate powers to do So. Since the Constitution of India has neither defined such transactions to be an inter-state transaction nor given powers to determine so, the provisions ought to be treated as ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to a Special Economic Zone developer or unit D2. Section 2(5) of IGST Act defines 'export of goods' with its grammatical variations and cognate expressions, means taking goods out of India to a place out of India. D3. From the conjoint reading of the above-mentioned provisions it can be inferred that any inter-state supply would qualify to be zero-rated only if it falls within the purview of export or supply to SEZ. D4. In order to identify these supplies as Zero-rated the same have been covered under the purview of inter-State supply. However, this cannot be interpreted to mean that all other supplies falling within the purview of Section 7(5)(a) of IGST Act but not covered under section 16 of IGST Act would be considered as liable to IGST. D5. The terms 'Export' covers the cases of taking goods out of India, however, principally even tool being supplied to customer at d location outside India should get covered under the purview of term 'Export'. Interpreting the term 'Export' to only cover supplies where goods are taken out of India would be restrictive and would disregard the principle of consumption based tax. 'Export of goods' should be interpreted in a broader way to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or (b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or (c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or (d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located: Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient. E4. It can be observed from the aforesaid provisions that there is specific provision in case of services wherein it is specifically provided that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortation i.e. when the import declarations are filed before Customs authorities for the customs clearance purposes for the first time. Further, value addition accruing in each such high sea shall form part of the value on which IGST is collected at the time of clearance.' F3. The Circular clearly mentions that the tax is leviable only at the time of importation of goods in India and not when the goods the sold while they are in High Seas. Similarly, when the goods are in Germany i.e. outside India, it can be said that since, the goods are outside India, no GST is applicable on the same as the subject on which tax is being levied is outside the territory of India. F4. Another circular was issued by CBEC to clarify the tax applicability of goods lying in bonded warehouse. Circular No. 46/2017-Customs dated 24th November 2017, provided that in case the goods are sold while the same lying in bonded warehouse, the same shall be chargeable to GST. F5. It is pertinent to note that one of the basic reasons behind differential tax treatment in both the circulars above is that in case of High Seas the goods are not in India while in case of warehoused goods, the goods are in India. F6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply is said to be made outside the State or in the course of import or export. However, no such principles have been formulated till date for GST. H4. The levying section 6 of GST Act provided that CST shall be levied on all inter-State sale of goods. Similar to GST, CST Act specifically defined inter-State supplies, sale in the course of import, sale in the course of export and intra-State sale out of which only inter-State sale was made liable to CST. H5. Section 5 of CST Act, 1956 provided for the principles to determine whether the transaction is a sale or purchase in the course of import or export and the same are reproduced below: (1) A sale or purchase of goods shall be deemed to take place in the course of the export the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of titl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 2017, input tax credit of all the goods and/ or services may be available to the registered person. Further, section 16 of CGST Act, 2017 lays down various conditions for a person to become eligible to avail input tax credit which inter-alia include receipt of goods and/ or services. J3. The relevant provisions of section 16 of CGST Act, 2017 is reproduced below: (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise-- (i) where the goods a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been received from perspective and the credit should accordingly, be made available to him. J7. Further, in order to achieve the objective of introduction of GST, the seamless flow of credit should be maintained and the recipient of goods should be made eligible to avail the input tax credit. J8. Also, if the input tax credit is denied the domestic products may became expensive and that may have implications on 'Make in India' initiative of Government of India and State Governments as well. CONCLUSION 1. In view of the above submissions, the transaction of sale/ supply of goods by the supplier in India should not be made liable to IGST under section 7(5) (a) of IGST Act, 2017 since, the intention behind section 7(5) (a) was to specifically provide that export or import of goods and/or services should be treated as inter-state transaction and not to tax the transactions under consideration. 2. If at all the transaction is made taxable, the recipient should be eligible to avail the input tax credit. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Question raised. (a) Whether the sale of goods, which are located ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 26.06.2018, Sh. Nitin Shah, Advocate, Sh. Niraj Menon, C.A., and Sh. Anant Joshi, Manager Taxation appeared and made oral and written submission as per their ARA. The jurisdictional officer, Sh. Sanjay Shinde, Dy. Commr. of S.T. (PUN-VAT-E-610), Pune appeared and made written submissions. 05. OBSERVATIONS We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. The factual matrix of the case is as below: Applicant is engaged in supply of bearings and tools. The Applicant supplies bearings to a wide range of customers which inter-alia include Original Equipment Manufacturers (OEM). For manufacture of bearings for specific customer, a specific type of tool is required. These tools are developed on the basis of the requirements of the customers. Using these specially designed tools, child parts are manufactured and supplied to their customer. The sample transactions are submitted by the applicant before us which were entered into for supply of bearings between the applicant and one of the customer M/s. Renault Nissan Automotive India Pvt Ltd, Tamil Nadu. Applicant have two purchase orders as below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orized. 4. The term 'Zero-rated supply' should be read in liberal manner and should not be restricted only to taking of goods outside India. 5. Place of Supply of Service specifically covers case where recipient is located outside India, unlike Place of Supply of Goods 6. Circular issued for High Sea Sales will be applicable to the transaction under consideration. 7. To state code available in GST returns to mention the Place of Supply in case of these transactions 8. The transaction was not taxable under erstwhile indirect tax laws and hence, the same should not be liable to GST. 9. VAT is payable on the said transaction under European VAT Laws. 10. If at all tax is applicable on the transaction, then input tax credit of the same should be available to the recipient of supply In view of the above, applicant submits that the transaction of sale/supply of goods by the supplier in India should not be made liable to IGST under section 7(5) (a) of IGST Act, 2017 since, the intention behind section 7(5) (a) was to specifically provide that export or import of goods and/ or services should be treated as inter-state transaction and not to tax the transactions under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. From the reading of Section 7(2) of the IGST Act We find that Supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce. In addition to what is stated above we find that the location of the applicant as a supplier of goods is in India and the place of supply of goods is outside India i.e. Germany and such impugned transaction get clearly covered by the scope of section 7(5) (a) of the Act. As a result the transaction is in the nature of interstate trade and commerce. Thus fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategories 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 electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. From the transactions placed by the applicant before us there is no doubt that the goods of the applicant would be imported goods if they are brought from outside the country into India and it is clear that when the location of the supplier is in India and the said goods are delivered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 2(78) 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 sold in the subject transaction 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. 6. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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