2018 (12) TMI 226 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 465 (A. A. R. – GST) – Levy of GST – sale of goods outside India – section 7(5) (a) of Integrated Goods and Services Tax Act, 2017 – place of supply – entitlement of Input Tax Credit to the recipient of service – Scope of IGST Act – territorial jurisdiction – Held that:- There are two different transactions effected in present matter between the parties for the supply of same tools. One from foreign supplier to the applicant (in short T1) and second between applicants to customer within India (in short T2). The transaction covered by the present application herein after will be referred to as T2 transaction.
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The applicant would be purchasing from Schaeffer Germany, who is a manufacturer on principal to principal basis. The ownership of the said goods get transferred to the applicant without any physical movement of the goods from Germany to India. However the goods remain in the possession of
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tion 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.
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Levy and collection of GST – Held that:- As per Section 7(2) and 7(5) (a) of the [GST Act and proviso to Section 50) Of the IGST Act it is very clear that in respect of imported goods into the territory of India there is no levy and collection except in accordance with the provisions of Section 12 of the Customs Act, 1962 and Section 3 of the Custom Tariff Act, 1975. Section 12 of the Customs Act, 1962 provides that custom duties which includes integrated tax in respect of imported goods would be levied only at the time of import or export of goods – In case of goads 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 t
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BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by INA Bearing India Private Limited, the applicant, seeking an advance ruling in respect of the following question. a) Whether the sale of goods, which are located outside India, would be liable to tax in India under section 7(5) (a) of Integrated Goods and Services Tax Act, 2017? b) If answer to (a) is yes, then whether the recipient, 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
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ts of the customers. Using these specially designed tools, child parts are manufactured and supplied to our customer. Typically, while entering into a contract for supply of bearings, the customer issued two purchase orders viz: PO NO. RNAIPL/2013(B4A/PTVT/230 dated 13.09.2013 for supply of tools and PO No. RN15-MP-113W-K316 dated 28.05.2015 for supply of tappets. The Applicant in-turn raised a purchase order on Scaheffler Technologies AG & Co. KG (for the purpose of brevity herein after referred as Scaheffler Germany ) for supply of tools. The tools which are required for manufacturing is developed outside India by Scaheffler Germany. Once the tool was developed, Scaheffler Germany had raised an invoice bearing number 130213462 dated 16.03.2018 on the Applicant for the tools and the ownership of the said tools got transferred to the Applicant, however, there was no physical movement of tools i.e. the tools continue to remain in the possession of Scaheffler Germany. The Applicant h
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whether Applicant s customer would be eligible to avail the input tax credit of IGST charged by the Applicant. The Applicant is making detailed submission herein below to demonstrate why IGST should not be applicable on the transaction under consideration. 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 prov
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supplier in relation to the goods or services or both supplied Accordingly, in case of T2 in question, tool is supplied by Applicant to customer even if there is no movement of tool and hence, Applicant would be construed as Supplier . Place of Supply – Section 10 of IGST Act provides for various scenarios to determine the place of supply of goods. In case of T2, the supply does not Involve movement of goods, Hence. without prejudice to Applicant s submission herein below, it appears that the said supply would get covered under section of IGST Act which is reproduced below: 10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as unde,- (a) …… (b) …… (c) where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient; (d) …… (e) …… In view of
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upply 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 IGST Act. In case
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of supply shall be outside India. Hence, the Applicant pleads 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. A8. Given the aforesaid, the tax cannot be said to be payable on the transaction under consideration as the subject i.e. goods (tools), on which tax is payable in outside India i.e. beyond the jurisdictional extent of IGST Act, 2017. B. Tax cannot be demanded on the said transaction as the collection. if at all tax is leviable, itself will be unconstitutional B1. It is no more res-integra that no tax shall be collected unless there is constitutional validity to levy the same. The Constitution of India was amended vide IDISI Constitution (Amendment) Act, 2016 to empower the Central Government and State Governments to levy GST. B2. To empower the Parliament to levy and collect IGST on inter-state transaction, Article 269A was inserted. The said article reads as under: 269A. (1) Goods and s
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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 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 o
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oss the Customs frontiers of India; or (iii) Supplies made to a tourist referred to in section 15 The above mentioned list has been excluded from ambit of intra-State supply so that administrative and Jurisdictional powers would vests with Central Government and not State Government. C3. In view of above submission, Applicant contends that section should be read only to exclude such transactions from the purview of State Government 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: 1. Export of goods; or 2. Supply of goods to a Special Economic Zone developer or unit D2. Section 2
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rictive and would disregard the principle of consumption based tax. Export of goods should be interpreted in a broader way to cover such cross-border transaction where goods are delivered to a customer outside India even if not taken from India. Restricting the concept of export only to cases involving movement from India would mean disregarding the fact that place of supply is outside India. Thus, 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. D6. Assuming without accepting that this transaction of tool supply would not qualify as zero rated supply , however. 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. Under erstwhile Service Tax legislation, if the place of provision of service was Outside India but other conditions of Export were not getting fulf
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is invited to proviso to section 12(3) of IGST Act, 2017, which provides that in case of supply of service in relation to immovable property is outside in India and if both the supplier and recipient are in India then the place of supply shall be the location of recipient. E3. For your reference we have reproduced relevant portion of section 12(3) of IGST Act, 2017 (3) The place of supply of services,- (a) directly in relation to an immovable property, including services provided by architects, interior 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 re
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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 where provider and recipient are located in taxable territory Place of provision of a service, where the location of the provider of service us well us that of the recipient of service in the faxable territory, shall be the location of the recipient of service. E6. It can be observed that in case of services the legislatures have always specifically provided for levying tax basis the location of supplier and recipient. However, in case of goods there is no such provision which states that, even where goods are situated/ used/ consumed outside India and the location of the supplier and the recipient is in India, the place of supply shall be outside India. E7. Accordingly, it can be inferred that for the purpose of levy of GST on services location of supplier and recipient would be relevant and if both are in India then the sam
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oods, whether one or multiple, shall be levied and collected only at the time of importation 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
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with section of IGST Act, 2017, is outside India, There is no mechanism in the GST returns to report the transaction in GSTR-1 mentioning the place of supply to be a place outside India. Accordingly, the collection mechanism of such IGST is unclear and consequently it is unclear as to whether only Central Government or both Central and State Government would receive this revenue. G3. 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, CST etc. The intention of the legislator has not been to tax the transactions which were not taxable under existing laws but to have a uniform tax regim
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ourse 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 title to the goods before the goods have crossed the customs frontiers of India. (3) …….. (4) …….. (5) …&
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Where goods are not dispatched or transported, the place of supply shall be deemed to be the place where the goods are located at the time when the supply takes place. I3. It can be observed from the aforesaid provision of EU VAT that the place of supply for the transaction under consideration will be Germany and has already attracted EU VAT. Hence, the same should not be made liable to GST in India. Levying GST on such transaction in India would lead to supply to same tools being taxed in Germany as well as in India. Globally, various countries are adapting place of supply principles in a way to avoid double taxation. Hence, if the same goods have already been taxed under EU VAT they continue to remain in Germany the same tools should not be made subject to GST. J. If at all tax is applicable on the transaction. than input tax credit of the same should be available to the recipient of supply J1. One of the major objective of introducing GST in India was to allow the seamless flow of
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ds 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 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; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.] (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax c
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yable 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 made liable to GST then it should be deemed that such goods 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 seamles
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located outside India would be liable to tax in India u/s 7(5) (a) of IGST Act 2017? Explanation: As per section 7(2) of IGST Act 2017 which is reproduced below: Supply of goods imported into the territory of India, shall be treated to be a supply of goods in the course of inter-state trade or commerce. In this case goods doesn t move into the territory of India. Hence IGST Act will not apply in this case. Also section 10 of IGST Act provides for various scenarios to determine the place of supply of goods. In case of T2, the supply does not involve movement of goods. Hence, without prejudice to Applicant s submission herein below, it appears that the said supply would get covered under section 10(1) (c) of IGST Act which is reproduced below: 10(1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under, (a)………….. (b) ………….. (c) where the supply does not involve movement of
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he application when Shi Nitin Shah, Advocate, Sh. Niraj Menon, C.A., and Sh. Anant Joshi, Manager Taxation appeared and requested for admission of application as per their contentions in ARA application. The jurisdictional officer, Shi Y. A. Lokre, Dy. Commr. Of ST. (PUN-VAT-E-610), Pune appeared and made written submissions. The application was admitted and final hearing was held 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 inte
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which are required for manufacturing are developed outside India by Schaeffer Germany. Once the tools are developed, Schaeffer Germany raise an invoice on applicant at Pune and as corollary of this the ownership of the said tools get transferred to the Applicant, without physical movement of tools from Germany to India i.e. the tools continue to remain in the possession of Scaheffler Germany. It means that there is no transfer of goods [Tools] in physical form and the Tool remain under the possession of Schaeffer Germany. The Applicant in turn raises an invoice to their customer M/s. Renault Nissan Automotive India Pvt Ltd, Tamil Nadu and thereby the ownership of the tools get transferred to the customer without physical movement of tools, and the tools physically continue to remain under the possession of Schaeffer Germany. Thus we find that there are two different transactions effected in present matter between the parties for the supply of same tools. One from foreign supplier to th
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d 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 specif
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sion 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. On the basis of the above set 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 goads 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 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
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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 from the harmonious reading of Section 7(2) and Section 7(5)(a) of the IGST Act and the discussion held in this behalf herein above we clearly find 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
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d diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the 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
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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/ 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) and 7(5)(a) of the IGST Act. 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 Act 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 integrate
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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 imported 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. We find that in the definition of exempt supply as given in Section 2(47) of the 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 Goo
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