A company dealing in the software does the development of software and got the order from Thailand for the development of software and Hardware. The company did development of software and exported it to Thailand. But the hardware was brought from Hongkong and it has not crossed the territory of India and directly supplied to Thailand on bill to ship to basis. It was bill to India and Ship to Thailand directly. The company applied for advance ruling and raised question regarding the question :
i) Whether GST is payable on goods procured from Hongkong 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 customers located outside India, where goods are shipped directly from Hongkong's premises (located outside India) to the Customer's premises in Thailand?
The facts of the case:
1. As per Section 2(10) of the Integrated Goods and Services Tax Act, 2017, "import of goods" with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India.
2. Accordingly, to section 2 (7) of integrating Goods and service tax act,2017, supply of goods imported to be the territory of India, till it reaches the custom frontier of India, shall be supply of goods in the course of interstate trade or commerce.
3. 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 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
4. Upon the conjoint reading of the provision of IGST Act, Customs Tariff Act, it is found that integrated tax on goods will be charged when duties of customs are levied on goods as per section 12 of Customs Act,1962.
5. Vide circular no 33/2017 dated 1.8.2017 it has been clarified in subsection 12 of section 3 of the customs tariff act,1975 that all the duties, taxes, and cesses will be imposed at the time of importation i.e when the import declaration is filed before the customs authorities for customs clearance.
6. We find that an integrated tax could not be levied where the bill of entry has not been filed.
7. The same way for levying of GST on outward supply from place of the vendor to customer, it is to mention that the thumb-rule for determining the taxability of any transaction is to ascertain whether the transaction tantamount to ‘supply' in terms of the provisions of law. The term ‘supply' has been defined at Sec. 7 of the CGST Act, 2017 which reads as under:
1. For the purposes of this Act, the expression “supply” includes :
i. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
ii. import of services for a consideration whether or not in the course or furtherance of business; [and]
iii. the activities specified in Schedule I, made or agreed to be made without a consideration;
8. In the instant case, the supplier is located in India, and the place of supply is outside India. Such supply shall be treated as inter-state supplies. The place of supply in the instant case would be governed by the provisions of Sec. 10 of the IGST Act, 2017 of which the relevant text reads as under
9. In the instant case, it is an undisputed fact that the supply involves the movement of goods and therefore the place of supply would be the termination for delivery to the recipient. The goods under consideration are supplied to overseas buyers as declared by the applicant and as such, the place of supply will be a place outside India. Further, the supplier is the applicant who has declared the principal place of business within India and issues the invoices for the sale of such goods.
10. Export of goods has been defined in section 2[5] of IGST Act,2017 which reads as under ;
Export of goods would mean—‘With its grammatical variations and cognate expressions, means taking goods out of India to a place outside India'.
The above definition indicates that the act of taking goods out of India to a place outside India qualifies as export. In the instant case, the goods have not crossed the Indian customs frontier and as such, it is clear that the goods are not physically available in the Indian territory. When the goods are not available in the Indian territory, the question of taking goods out of India does not arise. Thus, the subject transaction does not qualify as the export of goods.
Similar AAR being decided in Sterlite Technologies Ltd in Gujarat.
Conclusion:
1. GST is not payable on goods procured from vendors outside India, where the goods so purchased are not brought down into India.
2. Applicable GST is payable on goods sold to customers located outside India, where goods are shipped directly from the vendor's premises[ located outside India] to the customer's premises.
Disclaimer: The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon.
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