2018 (12) TMI 67 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (19) G. S. T. L. 663 (A. A. R. – GST) – Levy of tax – the supply of goods which are moved from a place located outside taxable territory and are delivered at a place outside taxable territory – section 7(5)(a) of IGST Act – input tax credit – recipient of goods – inter-state supply – Place of supply of goods – territorial jurisdiction.
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Held that:- It is clear that the applicant would be purchasing goods from Jotun Norway on the bas1S of purchase orders received from their customer in India and the said goods would be delivered by JN from their Norway place to the ship/vessel of the customer which is also in non-taxable territory i.e. outside India. The order received by the applicant from their customer in India and the order placed to Jotun, Norway are back to back orders. Thus it is seen that the goods are delivered by JN from a place outside the taxable territory of India to the customer’s vessel which is als
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s imported into India is to be levied and collected in accordance with Section 3 of the Customs Tariff Act, 1975 and Section 12 of the Customs Act, 1962 and the same is to be levied and collected at the time of import into India. The goods are considered to be imported into India only after they clear the customs frontier after compliance of applicable procedures and payment of duty as applicable.
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In case of goods supplied on an out an out basis as is in the present case, 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 from and to a non-taxable territory, 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 it is very clear that the goods sold in the subject transaction are non-taxable sup
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are moved from a place located outside taxable territory and are delivered at a place outside taxable territory, would be liable to tax in India under section 7(5)(a) of IGST Act? b) If answer to (a) is yes, whether the recipient of the goods i.e. person liable to pay consideration, be eligible to avail the input tax credit of the said goods? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST 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 submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT
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sel for the purpose of maintenance purpose (hereinafter referred to as Dry Dock Supplies and Sea Dock Supplies) Applicant caters to paint and coating requirements for ships within India. It has been mutually agreed between all entities Of the Group that any requirement of supply of goods (paints) within a Country where Jotun Group entity is present would be served by that particular entity. Consequently in case where the applicant gets an order from Indian customer to supply paints to ship located near Norway, entity of Jotun Group located in Norway would be serving the said order by supplying paints to that ship and thereafter raising an invoice on the Applicant in this regard. To elaborate, sequential flow of transactions under such situation is presented as under: (a) A customer located in taxable territory ( Cl ), places an order on applicant (JIPL ) to supply goods (paint) as a new building, dry dock supply or sea dock supply to its ship / vessel located near Norway i.e. a place o
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INING APPLICANTS INTERPRETATION OF LAW IN RESPECT OF THE QUESTIONS RAISED A. Levy of IGST cannot be extended beyond territorial jurisdiction of the said legislation Evaluating IGST provisions to understand possibility of levying IGST A1. In order to deliberate on the question being sought, it is pertinent to analyse applicability of provisions of IGST Act, 2017 in terms of nature of the transaction. A2. Section 7 of IGST Act, 2017, makes provision to treat the transactions as interstate supply . In this regard, the Applicant hereby wishes to submit following provision of IGST Act, 2017 which would be relevant in analysing the needful: Section 7(5) of IGST Act, 2017 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 a Special Economic Zone developer or a Special Economic Zone unit; or (c) in the taxable territory, not being an intra-State Supply and not covered elsewhere in thi
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to be referred wherein provisions for determining place of supply has been laid down for various situations 10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under, (a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient. (b)…….. (C)…………….. (d) (e)where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board. A6. Applying the above provisions in the current situation, it could be construed that: For Dry Dock supply of goods – The Applicant is supplying paints to the Customer located in taxable territory. Hence the Applicant would be co
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ection 7(5)(a) where supplier is located in India and place of supply is outside India. A8. However, the 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. Further India has been defined in section 2(56) of CGST Act read with section 2(24) of IGST Act to mean the territory of India 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; A9. Hence, Applicant wishes to contend that scope of IGST Act is limited to territorial jurisdiction to which it extends. Thus, IGST levy can be introduced only to supplies
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ting that for the transaction under question where the goods are lying outside India i.e. in Norway, the place of supply shall be outside India. Hence, the Applicant pleads that it is outside the jurisdictional powers of the GST law to determine the place of Supply for goods when such goods are not located in India. A11. Given the aforesaid, the tax cannot be said to be payable on the transaction under consideration as the subject i.e. goods, on which tax is payable are supplied outside India i.e. beyond the jurisdictional extent of IGST Act, 2017. B. Constitution only permits sale in the course of import to be considered as interstate supply, hence, extending the scope of section 7(5)(a) of IGST Act to Out to out supply would be unconstitutional B1. It is no more res-integra that no tax shall be collected unless there is constitutional validity to levy the same. In this regard, we wish to draw your attention to following Article of The Constitution of India which empowers the Central
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ate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. B3. On plain reading of the above provisions, it can be seen that, (a) Basis clause (5) of article 269-A, the Parliament may, by law, formulate the principles for determining the place of supply and when a supply of goods or of services or both takes place in the course of inter-state trade or commerce. The power given is to formulate principles to decide when a supply takes place in the course of inter-state trade or commerce . (b) The word inter-state is not defined in the constitution. Therefore the natural meaning of the term inter-state needs to be adopted, i.e. between states . lnvolvement of more than one state. (c) Consequently, for any transaction if only one state is involved, the said supply cannot be termed as inter-state. (d) For formulating the principles to determine when a supply takes place in the course
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ons to be an inter-state transaction nor given powers to determine so, the provisions ought to be treated as ultra-vires. C. Cross-border transactions are being covered under Inter-State supply Only to exclude the same from purview Of State Government, however. that would not conclude IGST applicability unless authorised C1. Applicant wishes to submit that section 7 and section 8 of IGST Act have been enacted to lay down principles to determine nature of supply to be inter-State supply and intra-State supply respectively. Thus, the objective appears to be to delineate powers of State Government to levy respective GSI- only on intra-State supply and not to cover Inter-State Supply . C2. However, section 7 or section 8 of IGST Act should not, in isolation, be read as sections enabling levy of IGST on all supplies covered therein. IGST Act needs to be read in harmonious manner considering the constitutional empowerment and extent of its applicability to determine levy. Merely because a tr
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ent and said section should not be considered as piece of legislation which is empowering Central Government to travel beyond territorial jurisdiction and levy IGST on all transactions, covered therein. D. The term Zero-rated supply should be read in liberal manner and should not be restricted only to taking of goods outside India D1. Attention is invited to section 16 of IGST Act, which provides that Zero rated supply means any of the following supplies of goods or services or both: (a) Export of goods or services or both; or (b) Supply of goods or services or both to a Special Economic Zone developer or unit D2. Further 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 abovementioned 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. D
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involving movement from India would mean disregarding the fact that place of supply is outside India. Thus, the Applicant pleads for extending the meaning of export of goods even to cases where goods are delivered to customer outside India even if not taken from India. D8. Assuming without accepting that such supplies would not qualify as zero rated supply , the same should, at least, be treated as not liable to GST since the concept of exports could be deemed to be covering a case where the goods are consumed/ used outside India. D9. Under erstwhile Service Tax legislation, if the place of provision of service was outside India but other conditions of Export were not getting fulfilled then the export linked benefits were not made available to such services. However, at the same time, they would still not be liable to service tax. Accordingly, Applicant pleads that even if transaction in question may not be considered as Export of goods , the same should be considered as not liable to
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. For your reference we have reproduced relevant portion of section 12(3) of IGST Act, 2017 (3) The place of supply of services, – (a) (b) – (C) – (d)- 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. … (Emphasis provided) E3. It can be observed from the aforesaid provisions that there is specific provision in case of services wherein it is specifically provided that the place of supply shall be the location of immovable property. However, if both the supplier and recipient are in India and location of immovable property or boat or vessel is outside India then the place of supply, for the purpose of GST, will be location of the recipient of service. E4. Similar provisions were provided in Rule 8 of Place of Provision of Services Rules, 2011 under Service Tax regime. We have reproduced the said provisions below: 8. Place Of provision of services whe
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Thus, in case of transaction in question, since location of goods is outside India the levy should not arise in India in the absence of specific provision in this regard. F. Circular issued for High Sea Sales will be applicable to the transaction under consideration F1. Under Circular No 33/2017 – Customs dated August 01, 2017, a clarity was provided as regards tax implications on High Seas Sales. Based on the same, it was decided that levy of IGST on High Seas transactions of imported goods, shall be only at the time of importation i.e. when import declarations are filed before Customs authorities for clearance purposes. Accordingly, IGST liability arising on such transactions would be disposed of only once, by the ultimate importer who clears the goods for home consumption. Consequently first leg of High Seas Sales, where goods are supplied out of India, would be exempted from payment of IGST. F2. The relevant para of the circular is reproduced below: 4. GST Council has deliberated o
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e Hon ble Advance Ruling Authorities of Kerala in case of M/s. Synthite Industries Ltd. = 2018 (4) TMI 583 – AUTHORITY FOR ADVANCE RULING – KERALA where it was ruled that the applicant is neither liable to GST on sale of goods procured from China and directly supplied to USA nor on sale of goods stored in the warehouse of Netherlands, after being procured from China, to customers in and around Netherlands, as the goods are not imported into India at any point . F5. Further 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 soId while the same lying in bonded warehouse, the same shall be chargeable to GST. F6. 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. F7. Giv
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is unclear and consequently it is unclear as to whether only Central Government or both Central and State Government would receive this revenue. G4. In the absence of ambiguity around collection mechanism and revenue Sharing of Such GST, it appears that intention of legislatures was never to levy and collect IGST on such type of transaction. H. The transaction was not taxable under erstwhile indirect tax laws and hence, the same should not be liable to GST H1. GST has been introduced with a view to subsume majority of indirect taxes applicable in India like service tax, central excise, entry tax, VAT, GST etc. The intention of the legislator has not been to tax the transactions which were not taxed under existing laws but to have a uniform tax regime throughout the country. H2. For the transaction under consideration, no tax was leviable under Customs Act, 1962, Central Excise Act, 1944, Central Sales Tax Act, 1956 and other State VAT laws prior to implementation of GST in India. H3. A
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port 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 of 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 title to the goods before the goods have crossed the customs frontiers of India. (3) …….. (4) …….. (5) ………… H6. From the above, it can be understood that even under CST Act, similar type of transaction was not liable to CST. Since, the transaction of sale/ supply was not taxable under erstwhile Indirect Tax laws, the GST should not be payable
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isions: Section 4(1) of VATA: Scope of VAT on taxable supplies VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. Section 7(2) of VATA: Place of supply Subject to the following provisions of this section, if the supply of any goods does not involve their removal from or to the united Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom. ……Emphasis supplied I3. Basis the above provisions, it could be inferred that for a transaction to be within the scope of UK VAT, following 4 conditions needs to be satisfied: It is a supply of goods or services It takes place in the UK It is made by a taxable person It is made in the course or furtherance of any business carried on by that person Further with reference to secti
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Further, section 16 of CGST Act, 2017 lays down various conditions for a person to become eligible to avail input tax credit which interalia 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 w
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eon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. J4. Without prejudice to the aforesaid submission, if at all tax is payable on the transaction under consideration then the recipient of supply should be eligible to avail input tax credit of the supply made to him and the condition of receipt should be deemed to have been complied with by applying explanation to section 16(2)(b) of CGST Act, 2017. J5. The Applicant contends that if a transaction is held to be liable qua the supplier and not the goods or services or both, then in the same analogy on the very transaction, the credit of input tax needs to be allowed based on the recipient and not whether the goods or services or both had been received or not. J6. If the transaction is deemed to be an inter-state supply and if the Same is
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ction is made taxable, the recipient should be eligible to avail the input tax credit. In addition to submissions made earlier, applicant also intends to submit the following: A. Recent rulings laid by the Hon ble Authority of Advance Ruling A.1. Under the recent ruling of the Hon ble Authority of Advance Ruling of Maharashtra in case of BASF India Limited = 2018 (7) TMI 53 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA (Annexure 1), it was observed 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 Customs Tariff Act, 1975. Further the authorities were of the view that the tax position on the said transaction was also confirmed under circular no 3/1/2018 – IGST dated 25.5.2018 issued by Central Board of indirect Taxes and Customs (Annexure 2). A.2. Under the said circular, a clarity was provided as regards to
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d not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse. ….(Emphasis provided) A.4. Drawing analogy from abovementioned circular Hon. Advance Ruling Authority has held such supply would get covered under the definition of non-taxable supply as per section 2(78) of CGST Act, 2017 which means a supply of goods or services or both which is not leviable to tax under this Act. A.5. Given the aforesaid, the applicant hereby submits that no GST can be levied on any supply till goods customs frontiers of India. Accordingly, no GST on supply of goods would be applicable when supply involves movement of goods from a place outside India to another place outside India wherein such goods never Cross customs frontiers of India. 03. CONTENTION – AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- It is submitted that, Issue on
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in this provision is given on supplier located in India and place of such supply is outside of India would be considered as interstate supply. The applicant has taken the reference of term Supplier . But if we go through the Section 20 of IGST Act, 2017 it doesn t covers definition of Supplier. The applicant has taken the reference of Section 10 of IGST Act, 2017. In the specific type of transaction mentioned in the application the applicant is challenging the jurisdiction of levy of IGST by taking reference of Section 2(56) of CGST Act, 2017 read with Section 2(24) IGST Act, 201% The applicant contends that the provisions of GST are travelling beyond it power by stating that for the transaction under question where the goods are laying out side of India i.e. in Norway. The place of supply shall be outside India. But Section 7(5) (a) of IGST Act, 2017 is self-explanatory an IGST on this transaction will be applicable. The applicant has also taken several references of constitutional p
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cannot treated as zero rated supply. The applicant request to apply the principle of Service tax legislation can no be accepted because the provision of IGST Act are self-explanatory. The applicant has also referred circular no 33/2017 of Custom dated August 2017. In this circular highs seas transaction and corresponding imports in the Custom frontiers of India is explained. The circular doesn t speak anything wrt Section 7(5) (a) of IGST Act, 2017. As the goods are not cleared through Customs frontiers of India the same will not be applicable. In applicant has raised the issue that there is no provision in GSTR-1 and GSTR-2 and thus therefore the collection mechanism of such IGST is unclear and consequently it is unclear as whether only central government or both center and state government would receive this revenue. Merely there is no provision in the return doesn t mean that the intention of legislation was not levy IGST. The applicant has said that if IGST is applicable the recipi
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& services. 7) To claim ITC the Input Tax must be paid through electronic cash ledger or electronic credit ledger. 8) It is mandatory to file all the applicable GST returns. 9) For goods which are received in lots, you can claim ITC only after you have received the final lot. 04. HEARING The case was scheduled for 27.06.2018 for Preliminary hearing but At the request of Sh. Nitin S. Shah, Advocate , Who was having another hearing on 26.06.2018 the Preliminary hearing was preponed and held on dt. 26.06.2018 With respect to admission or rejection of present application and Sh. Nitin S. Shah, Advocate duly authorized appeared and requested for admission of application as per details in their application. During hearing Jurisdictional Officer was not present. The application was admitted and called for final hearing on 24.07.2018, Sh. Nitin Shah, Advocate appeared and made oral and written submissions. The Jurisdictional Officer, Sh. Rajesh Gaikwad Dy, Commr. Of S.T. (E-607), large Tax
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. Thereafter JN would raise an invoice on the applicant transferring the ownership of the goods to the applicant pursuant to which, the applicant would be raising an invoice on their customer located in taxable territory, thereby ultimately transferring the ownership to the Customer. In view of the above situation, the applicant has raised the following questions:- a) Whether the supply of goods which are moved front a place located outside taxable territory and are delivered at a place outside taxable territory, would be liable to tax in India under section 7(5)(a) of IGST Act? b) If answer to (a) is yes, whether the recipient of the goods i.e. person liable to pay consideration, be eligible to avail the input tax credit of the said goods? In this connection among the various submissions made by the applicant, they have also contended that :- i. The levy of IGST on said transaction mentioned above would be ultra vires the IGST Act. ii. It is outside the jurisdictional powers of the GS
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lace outside the taxable territory of India to the customer s vessel which is also the taxable territory of India. This transaction is similar to selling of goods on High Seas Sale since in both the cases the goods purchased do not cross the customs frontiers of India. In view of the above facts we would be required to refer to the provisions of IGST Act, 2017. First of all to confirm the nature of supply Of present goods i.e. whether inter-state or intra-state we are required to refer to Chapter IV of the IGST ACT, 2017, which reads as under:- CHAFTER IV DETERMINATION OF NATURE OF SUPPLY Inter-State supply 7. (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in,- (a) two different Stales; (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 th
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ar 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. From the proposed 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 said goods are delivered/supplied from a place outside India to a place outside India, these goods have not crossed the customs frontiers of India Thus clearly the transaction in these goods are in the nature of inter-state supply as per Section 7(2) of the IGST Act. Now when we are clear that the subject transaction in question is in the nature of inter-state sales, the liability to tax in respect of these goods would be as per Section 5 of the IGST Act which reads as under: CHAPTER III LEVY AND COLLECTION OF TAX Levy and collection 5. (1) Subject to the provisions of sub-section (2),
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ip;….; (5) …………………….; We find that proviso to Section 5(1) of the IGST Act states that: 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 on the value as determined under the said Ad at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 . Thus from the above it is clear that integrated tax on goods imported into India is to be levied and collected in accordance with Section 3 of the Customs Tariff Act, 1975 and Section 12 of the Customs Act, 1962 and the same is to be levied and collected at the time of import into India. The goods are considered to be imported into India only after they clear the customs frontier after compliance of applicable procedures and payment of duty as applicable. Thus as per Section 7(2) of the IGST Act and proviso to Section
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e CGST Act is as under:- Section 2(47) of the Central Goods and Services 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 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 furth
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