Stevedoring, storing, packing goods imported temporarily before exporting amounts to 'export of service' post February 01, 2019

The AAR, Gujarat in the matter of M/S Manoj Bhagwan Mansukhani (M/S. Rishi Shipping) [GUJ/GAAR/R/12/2021dated January 27, 2021] ruled that services provided viz. stevedoring, transportation, storage, bagging, stuffing, and transportation of the goods which are temporarily imported into India before exporting shall not be considered as 'Export of service' upto January 31, 2019, but shall be considered as 'Export of service' w.e.f. February 01, 2019. Accordingly, it shall not be eligible for 'Zero rated Supply' under Section 16 of the Integrated Goods and Services Tax Act, 2017 ('IGST Act') upto January 31, 2019, but shall be eligible for the same w.e.f. February 01, 2019.

Facts

M/S Manoj BhagwanMansukhani (M/S Rishi Shipping) ('the Applicant') is a service provider operating in Kandla port and handling imported fertiliser from abroad on behalf of Indian fertilizer companies.

Further, the Applicant used to discharge bulk fertiliser from the vessels, packing it into bags and then make despatches by rail, road and water and store in custom bonded warehouse without payment of custom duty and GST. After packing bulk fertiliser, the Applicant stuffed the fertiliser bags into containers and despatch the same after 2/3 months (as per instructions of their clients) for export to the ultimate buyers of the clients of the Applicant.

Issue

• Whether the services such as stevedoring, transportation, storage, bagging, stuffing and again transportation of the goods (which are temporarily imported) provided by the Applicant can be considered as 'Export of services'?
• Whether the Applicant is eligible for 'Zero rated Supply' under Section 16 of IGST Act?

Held

The AAR, Gujrat in GUJ/GAAR/R/12/2021dated January 27, 2021held as under:

• Noted that the fertilizers never crosses the customs barrier and mix-up with the indigenous goods as these goods are temporarily imported to India (for export purpose) and are stored in customs bonded warehouses and exported from there to outside India.
• Further, the service recipients (the clients of the Applicant located outside India) neitherhave a place of business in India for which registration has been obtained nor do they have any place of business other than the place of business for which registration has been obtained, in India.
• Analysed the definition of export of services under Section 2(6) of the IGST Act and stated as under:
  • Condition (i) i.e., 'supplier of service is located in India' if fulfilled by the Applicant
  • Condition (ii) i.e., 'recipient of service is located outside India' is fulfilled by the Applicant in terms of Section 2(14)(d) of the IGST Act which states that in absence of place of business or fixed establishment, the location of the usual place of residence of the recipient shall be the location of the recipient of services which is outside India.
  • Condition (iii) i.e., 'the place of supply of service is outside India' is not fulfilled in terms of Section 13(3)(a) of the IGST Act as the location of supply of service is not located outside India but in India. Further, second proviso to Section 13(3)(a) of the IGST Act shall not be applicable as the Applicant is not providing repair services.
  • Condition (iv) i.e., 'payment has been received in convertible foreign exchange' is fulfilled by the Applicant.
  • Condition (v) i.e., supplier and recipient of service are not merely establishments of a distinct person is also fulfilled by the Applicant.

Since Condition (iii) of the Section 2(6) of the IGST Act is not fulfilled by the Applicant, the services rendered by the Applicant will not be covered under 'export of services'.

• However, vide IGST(Amendment) Act, 2018 w.e.f. February 01, 2019 the second proviso to Section 13(3)(a) of the IGST Act has been amended to include goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any other use in India. Therefore, w.e.f. February 01, 2019 the Applicant shall be hit by the second proviso to Section 13(3)(a) of the IGST Act and thus place of supply shall be the location of the recipient of services as per Section 13(2) of the IGST Act which is outside India.
• Therefore, the services rendered by the Applicant will not be covered under 'Export of services' as envisaged in Section 2(6) of the IGST Act for the period prior February 01, 2019 but would be considered as 'Export of service' w.e.f. February 01, 2019 onwards.
• Since the services rendered by the Applicant are covered under 'Export of service' w.e.f. February 01, 2019 accordingly, it is covered under the provisions of Section 16(1)(a) of the IGST Act and shall amount to 'Zero rated Supply' under Section 16 of the IGST Act w.e.f. February 01, 2019.

Relevant Provisions

Section 2(6) of the IGST Act

'(6) 'export of services' means the supply of any service when,- -

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8'

Section 2(14) of the IGST Act

 '(14) 'location of the recipient of services' means,- -

(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and

(d) in absence of such places, the location of the usual place of residence of the recipient'

Section 13(1), (2) and (3) of the IGST Act (as amended)

'13. Place of supply of services where location of supplier or location of recipient is outside India.

• The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.
• The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.

• The place of supply of the following services shall be the location where the services are actually performed, namely:-

 (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process.

(b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.'

Section 16(1) of the IGST Act

'16. Zero rated supply

(1)'zero rated supply' means any of the following supplies of goods or services or both, namely:- -

(a) export of goods or services or both; or

(b) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.'