Supply of goods outside India from vendor’s premises located outside India is Covered under GST
Fact and Issue of the case
The appellant has proposed to undertake transaction of supply of hardware in the following manner, which is commercially known as ‘Merchant Trade Transaction’ –
> The appellant will receive an order from the customer located outside India
> Back to back order would be placed by the appellant to a supplier located outside India.
> As per the instruction of the appellant, Vendor (located outside India) will directly ship the goods to the customer (located outside India)
> The Vendor will issue invoice on the appellant against which payment will be made by him in the foreign currency.
> The appellant will raise invoice on the customer and will receive the consideration in foreign currency.
The appellant submitted an application before the Gujarat Authority for Advance Ruling (herein after referred to as the ‘GAAR’), and raised the following questions for advance ruling :-
(i) Whether GST is payable on goods procured from vendor located outside India in a context where the goods so purchased are not brought into India?
(ii) Whether GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises?
Observation of the Authority
Authority therefore, hold that Integrated Goods and Services Tax was payable during the period from 01.07.2017 to 31.01.2019 on supply of goods directly from the vendor’s premises located outside India in the non – taxable territory to the customer’s premises located at another place outside India in the non-taxable territory, without such goods entering into India. However, with effect from 01.02.2019, Integrated Goods and Services Tax is not payable on supply of goods directly from the vendor’s premises located outside India in the non – taxable territory to the customer’s premises located at another place outside India in the non-taxable territory, without such goods entering into India.
The appellant has referred to section 1(2) of the IGST Act, 2017 and section 2(56) of the CGST Act, 2017 read with section 2(24) of the IGST Act, 2017, and has submitted that the scope of the IGST Act, 2017 is limited to the territorial jurisdiction to which it extends.
In this regard, we observe that the supplier (appellant) in this case, who was liable to pay the IGST during relevant period, is located in India.
The appellant has referred to Article 269A and has submitted that section 7(5)(a) of the IGST Act, 2017 is ultra vires the law, since the law has defined a specific transaction to be an inter-state supply without having adequate powers to be so.
In our view, this authority being a creature of statute, cannot go beyond what has been stated in the law. Therefore, it is not within the purview of this authority to examine the vires of the law.
The appellant has submitted that though the term ‘export’ covers the cases of taking goods out of India, principally, even goods being supplied to customer located in India but delivered at a location which is outside India, should get covered under the purview of term ‘export.
The expression “export of goods” has been defined under Section 2(5) of the IGST Act, 2017. As per the said definition, “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India. The definition of “export of goods” leave no doubt that it covers only those transactions where goods are taken out of India to a place outside India. In the present case, the goods are admittedly not taken out of India and therefore the same do not qualify as “export of goods” in terms of section 2(5) of the IGST Act, 2017. When the statutory provisions are clear, the same cannot be interpreted in a manner to give altogether different meaning to such provisions.
The CBIC has issued Notification No. 35/2020-Central Tax dated 03.04.2020 on the subject of leviability of IGST on High Sea Sales of imported goods whereas Circular No. 46/2017-Customs dated 24.11.2017 has been issued on the subject of applicability of IGST / GST on goods transferred / sold while being deposited in a warehouse. None of these Circulars pertain to the supply of goods under ‘Merchant Trade Transaction’ by a supplier located in India. Therefore, these Circulars are not applicable in deciding the present issue.
When a transaction is leviable to IGST / GST in terms of clear provisions of law, the same cannot be held as not liable to IGST / GST merely on the grounds that such transactions were not taxable under erstwhile Indirect Tax Laws or under the United Kingdom VAT legislation or that there is no mechanism to report place of supply of such transaction in GSTR-1 Return.
The Advance Rulings in the cases of Synthite Industries Ltd. [2018 (12) GSTL 395 (AAR-GST)], INABearing India Private Limited [2019 (20) GSTL 465 (AAR-GST)] and Jotun India Private Limited [2018 (19) GSTL 663 (AAR-GST)] have been issued by considering CBIC Circular No. 33/2017-Customs dated 01.08.2017 and 3/1/2018-IGST dated 25.05.2018. As the various provisions of IGST Act, 2017 and the CGST Act, 2017 discussed hereinabove in detail have not been considered in those Advance Rulings, we are not inclined to follow the said Advance Rulings.
In view of the foregoing, the Advance Ruling No. GUJ/GAAR/R/04/2020 dated 17.03.2020 is modified to the extent Advance Ruling dealt with the issue of supply of goods to customer located outside India directly from the vendor’s premises located outside India, by holding that the Integrated Goods and Services Tax was payable from 01.07.2017 to 31.01.2019 and is not payable with effect from 01.02.2019 on supply of goods directly from the vendor’s premises located outside India in the non – taxable territory to the customer’s premises located at another place outside India in the non-taxable territory, without such goods entering into India.
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