Imported Goods stored in 3P FTWZ being sold and moved to Bonded Warehouse on 'as is where is' basis under MOOWR scheme are not liable to GST

The Tamil Nadu Authority for Advance Ruling has determined that imported goods stored in a third-party Free Trade Warehousing Zone (FTWZ) and subsequently sold on an 'as is where is' basis to a bonded warehouse under the MOOWR scheme are not subject to GST. This decision is based on the classification of such transactions under Clause 8(a) of Schedule III of the CGST Act, which covers the supply of warehoused goods before clearance for home consumption.

The Tamil Nadu AAR, in the matter of M/s. Sunwoda Electronic India Private Limited[Advance Ruling No. 06/ARA/2024 dated April 30, 2024], has held that sale of goods from third-party free trade warehousing zone ("3P FTWZ") on 'as is where is' basis to bonded warehouse under Manufacturing and Other Operations in Warehouse Regulations ("MOOWR") are not liable to GST as the same is covered under Clause 8(a) of Schedule III of the CGST Act, which reads as "Supply of warehoused goods to any person before clearance for home consumption".

Facts

M/s. Sunwoda Electronic India Private Limited ("the Applicant") are engaged in the business of importing and trading Portable Lithium System Batteries classifiable under 85076000. Further, the Applicant entered into a warehousing agreement with M/s. DHL Supply Chain India (P) Ltd. ("the third party") for storage of imported goods in the 3P FTWZ.

The applicant furthermore has entered into a contract with an Original Equipment Manufacturer ("OEM") licensed under Section 65 of the Customs Act, 1956 ("the Customs Act") read with MOOWR regulations for supply of imported portable lithium system batteries.

The goods are sold to the OEM's MOOWR unit while lying in 3P FTWZ and are cleared under Bond by the OEM's MOOWR's unit on need basis.

Therefore, the Applicant has preferred the present Advance Ruling to obtain confirmation on whether GST is leviable on the sale of goods warehoused in 3P FTWZ on "as is where is" basis to customer who clear the same to bonded warehouse under the MOOWR Scheme.

Issue

Whether GST is leviable on the sale of goods warehoused in 3P FTWZ on 'as is where is' basis to a customer who clears the same to Bonded Warehouse under MOOWR scheme?

Held

The Tamil Nadu AAR, in Advance Ruling No. 06/ARA/2024 held as under:

• Noted, Section 2(za) of the SEZ Act covers FTWZ within the meaning of a SEZ. Further Rule 8(5) of the SEZ Rules, 2006 provides that units in FTWZ shall be allowed to hold goods for dispatches as per the owner's instructions and shall be allowed for trading.
• Noted, Section 53 of the SEZ Act establishes SEZ link to the Customs Act and it becomes clear that SEZ are deemed to be considered as ports, airports, inland container depots, land station and land customs stations outside the Customs territory of India under Section 7 of the Customs Act.
• Furthermore Section 51 of the SEZ Act provides that the provisions of the Act shall have overriding effect over any other law
• "Warehoused Goods" as specified in clause 8(a) of the Schedule III of the CGST Act covers the warehouse/warehoused goods definition in respect of FTWZ/SEZ per Section 2(43) and 2(44) of the Customs Act which has also been specified under Section 2(zd) of the SEZ Act.
• Relied on, CBIC Circular No. 48/2020 - Customs dated October 27, 2020 provides that a Section 65 unit may source capital goods or inputs from SEZ/FTWZ and under Rule 46(13) of the SEZ Rules, 2006, a unit is permitted to transfer goods to a bonded warehouse without payment of duty.
• Further under FAQs issued by CBIC in F. No. 484/03/2015 - LC (Pt) it has been clarified that Manufacture and other operations in a bonded warehouse is a duty deferment scheme, and that the import duties (both BCD and IGST) stand deferred till they are cleared from the warehouse for home consumption.
• Held that, where the imported goods stored in a 3P FTWZ, is being moved to Bonded Warehouse under MOOWR scheme on effecting of sale by the Applicant to the OEM's MOOWR unit, taxes under GST are not leviable as the transaction is covered by Clause 8(a) of Schedule III of the CGST Act which reads as "Supply of Warehoused Goods to any Person before clearance for home consumption".

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