Selling of part of vessel in out of india both party indian
This query is : Resolved
09 October 2014
Selling company is Indian located at Mumbai one equipment (part of ship) on his ship which they intend to sell.
Ship is currently in Dubai. Equipment will be delivered to buying company in Dubai.
However, buying company is an Indian company in Mumbai and will be paying in Rupee only. Will this transaction attract VAT or it will be sale in the course of Export?
Please reply on behalf of seller's implementation.
Ship is currently in Dubai. Equipment will be delivered to buying company in Dubai.
However, buying company is an Indian company in Mumbai and will be paying in Rupee only. Will this transaction attract VAT or it will be sale in the course of Export?
Please reply on behalf of seller's implementation.
14 October 2014
Please reply if any one have solution to my query
23 July 2025
This is a nuanced case involving an **Indian-to-Indian sale** of equipment located *outside India* at the time of sale. Here’s how to assess the **indirect tax implications** — primarily VAT/CST or classification as **export**.
---
### 🔍 Situation Summary:
* **Seller**: Indian company (Mumbai)
* **Buyer**: Indian company (Mumbai)
* **Goods**: Equipment (part of vessel)
* **Location of Goods**: Dubai (i.e., outside India at time of sale)
* **Delivery**: Happens in Dubai
* **Payment**: In INR
---
### 💡 Key Questions:
#### 1. **Is this transaction considered a "sale in the course of export"?**
→ **No**, because **both buyer and seller are in India**, and:
* There is **no movement of goods from India to outside India**.
* The **goods are already located abroad**.
* **Export sale** under **Section 5 of CST Act, 1956** applies *only when the sale occasioned the export* or is a penultimate export — which is not the case here.
---
#### 2. **Is it a domestic sale liable for VAT/CST?**
→ **Still no**, because:
* The **goods are not in India at the time of sale**.
* **Section 4 of CST Act** defines the situs of sale as where the **goods are at the time of sale**. In this case, the **goods are in Dubai**, hence the sale is **outside the taxable territory**.
Even though both parties are Indian and payment is in INR, **the sale of goods located outside India is not liable to Indian VAT or CST**.
---
### 📘 Judicial Support:
* In *Tata Consultancy Services v. State of Andhra Pradesh*, the SC emphasized that **location of goods at time of sale** is crucial for determining the situs.
* Under **Sales Tax law**, the tax is only applicable if the **goods are within the state (or country)** at the time of sale.
---
### ✅ Conclusion:
**No VAT or CST is applicable** on this transaction **from the seller’s perspective**, because:
* The goods are **physically located outside India** when the sale takes place.
* This is **not a sale in the course of export** under CST Act.
* It is effectively an **overseas sale of goods** between two Indian entities, **not liable to Indian indirect taxes**.
---
Let me know if you want help drafting documentation to support the non-taxable nature of this transaction for audit or compliance purposes.
---
### 🔍 Situation Summary:
* **Seller**: Indian company (Mumbai)
* **Buyer**: Indian company (Mumbai)
* **Goods**: Equipment (part of vessel)
* **Location of Goods**: Dubai (i.e., outside India at time of sale)
* **Delivery**: Happens in Dubai
* **Payment**: In INR
---
### 💡 Key Questions:
#### 1. **Is this transaction considered a "sale in the course of export"?**
→ **No**, because **both buyer and seller are in India**, and:
* There is **no movement of goods from India to outside India**.
* The **goods are already located abroad**.
* **Export sale** under **Section 5 of CST Act, 1956** applies *only when the sale occasioned the export* or is a penultimate export — which is not the case here.
---
#### 2. **Is it a domestic sale liable for VAT/CST?**
→ **Still no**, because:
* The **goods are not in India at the time of sale**.
* **Section 4 of CST Act** defines the situs of sale as where the **goods are at the time of sale**. In this case, the **goods are in Dubai**, hence the sale is **outside the taxable territory**.
Even though both parties are Indian and payment is in INR, **the sale of goods located outside India is not liable to Indian VAT or CST**.
---
### 📘 Judicial Support:
* In *Tata Consultancy Services v. State of Andhra Pradesh*, the SC emphasized that **location of goods at time of sale** is crucial for determining the situs.
* Under **Sales Tax law**, the tax is only applicable if the **goods are within the state (or country)** at the time of sale.
---
### ✅ Conclusion:
**No VAT or CST is applicable** on this transaction **from the seller’s perspective**, because:
* The goods are **physically located outside India** when the sale takes place.
* This is **not a sale in the course of export** under CST Act.
* It is effectively an **overseas sale of goods** between two Indian entities, **not liable to Indian indirect taxes**.
---
Let me know if you want help drafting documentation to support the non-taxable nature of this transaction for audit or compliance purposes.
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