In Re: M/s. The Bank of Nova Scotia
GST
2019 (2) TMI 195 – AUTHORITY FOR ADVANCE RULING, TAMILNADU – 2019 (21) G. S. T. L. 238 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, TAMILNADU – AAR
Dated:- 31-12-2018
Order No. 23/AAR/2018
GST
MS. MANASA GANGOTRI KATA, IRS AND THIRU S. VIJAYAKUMAR, M.SC, MEMBER
Note : Any Appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the s
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payable [i.e. Basic Customs Duty(BCD) + IGST] on removal of goods from the FTWZ unit?
2. Whether the Circular No. 46/2017 is applicable to the present factual situation?
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2. BNSI have informed that they procure gold/silver from Bank's London branch ('BNSL') and supply the same to its customers in India. In order to undertake the said transaction, at present, BNSI files the Bill of Entry ('BoE') for import of gold/silver into India and stores the same in the vaults in India. The gold/ silver stored in vaults in India remains the property of the Bank and are under the legal possession of BNSL. The gold/ silver is withdrawn from the supplied quantity by BNSI and sold to customers in India.
2.1 The Applicant have submitted that they are now contempla
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ed transaction is set out hereunder:
a. Under the present option, BNSI files a BoE for import of gold/ silver into India;
b. The gold/ silver is stored in an FTWZ unit in India on account of BNSL, and the charges for storage are borne by BNSL;
c. Once BNSI receives an order for purchase of gold/ silver from customer in India, BNSI places an order/ requisition on BNSL;
d. The gold/ silver is then removed from the FTWZ unit and supplied to BNSI;
e. Subsequently, the gold/ silver is sold to customers in India by BNSL
2.3 The Applicant has submitted that FTWZ is a special category of Special Economic Zone as per Section 2(Za) of SEZ ACT, 2005. As per proviso to Rule 8 of CGST rules 2017, SEZ/FTWZ unit and Domestic Tariff Area (DTA) unit of BSNI will obtain separate GST Registrations and the units would be treated as distinct persons under CGST Act. Hence, the transaction of transfer of goods from FTWZ to DTA unit of BSNI can fall within the ambit of supply. Further as per circular 46
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the goods are supplied by one entity to another while the goods are still in the warehouse, the said supply continues to be a part of import transaction and should be liable to tax only once at the time when the goods are cleared for home consumption and duties of Customs are collected under the Customs Act. The Applicant has submitted that levy of IGST twice in such a situation would completely defeat the purpose of introduction of GST and is completely unwarranted.
2.4 The Applicant is of the view that removal of goods from FTWZ unit to a DTA unit of BNSI should not be subject to IGST under the Section 5 read with Section 7(2) of the IGST Act.
3. The Authorized Representative of the Applicant was personally heard in the matter . They stated that there are several proposed supplies involved for BSNL, BSNI and FTWZ. BNSI would file Bill of Entry for Import of gold/silver from BNSL and store the same in FTWZ unit, which is owned and operated by independent third party who merely wareh
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ty.
4.1. Chapter 7A of the Foreign Trade Policy 2015-2020 states that Free Trade & Warehousing Zones (FTWZ) are a special category of Special Economic Zones with a focus on trading and warehousing. The scheme envisages duty free import of all goods (except prohibited items, arms and ammunitions, hazardous wastes and SCOMET items) for ware housing. As far as bond towards customs duty on import is concerned, the units would be subject to similar provisions as are applicable to units in SEZs. These goods shall also be permitted to be sold in the DTA on payment of customs duties as applicable on the date of such sale. Payment of duty will become due only when goods are sold /delivered to DTA and no interest will be charged as in the case of bonded warehouses. In the present case, the Applicant is storing the imported goods in FTWZ which is a Customs bonded warehouse. Now, the applicant has raised the question whether IGST under section 5(1) read with Section 7(2) of the IGST Act in additi
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that integrated tax will be payable on such supplies and buyer will also pay the deferred customs duty at the time of clearance of goods from the warehouse. It has been represented that in this scenario, the buyer is being saddled with double taxation.
2. Kind attention is drawn towards sub-section (2) of section 7 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the “IGST Act”) whereby supply of goods imported into the territory of India, till they cross the customs frontiers of India, is treated as a supply of goods in the course of inter-State trade or commerce. Further, proviso to sub-section (1) of section 5 of the IGST Act provides that integrated tax on goods imported into India would be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the “CTA”). Thus, in case of supply of such warehoused goods the point of levy would be the point at which duty is collected under secti
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approval to declare the supply of warehoused goods within the Customs bonded warehouse as 'no supply' under Schedule III of the CGST Act, 2017 so as to ensure that no integrated tax is paid at the time of supply of warehoused goods by the importer to the buyer. Since the amendment of the law would take time, it is proposed that such intention/ decision of the GST Council may be effected through a circular.
5. In view of the above, it is proposed that Circular No. 46/2017-Customs dated 24.11.2017 may be rescinded and a fresh circular may be issued clarifying that supply of warehoused goods before their clearance from the warehouse would not be subject to levy of integrated tax and the same would be collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse. This clarification would be applicable from 1st of April, 2018. Accordingly, a draft circular as at Annexure-I is placed for approval of the GST Council.
Accordingly, Circular No.3/
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pply of warehoused goods, while being deposited in a customs bonded warehouse on or after 01.04.2018.
4.3 From the foregoing, it is evident that removal from the FTWZ to DTA is the point of deferred levy/payment of Customs Duty, i.e., at the time of clearance for home consumption from FTWZ. Further, as explained in the Circular referred above, the goods are not to be subjected to IGST when bonded and the payment of integrated tax is to be effected when the goods are removed for home consumption from the bonded warehouse, under the Provisions of Customs Tariff Act. Therefore, there is no requirement to pay IGST under the provisions of GST law at the time of clearance from the FTWZ. In the case at hand, the Applicant proposes to effect sale when the goods are bonded and then files Bill of Entry for Home Consumption and clears the goods from the FTWZ on payment of appropriate Custom duties (BCD & IGST). Therefore, as clarified in the Circular No.3/1/2018-IGST dated 25th May 2018, the pay
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