2018 (4) TMI 583 - AAR - GST

AAR rules no IGST liability for high sea sales when goods never enter India

The Kerala AAR ruled on IGST liability for high sea sales and international transactions. The applicant sold goods procured from China directly to USA ... Import of goods - levy and point of collection of Integrated Goods and Services Tax (IGST) on importation - High Sea Sales and IGST treatment - inclusion of value additions in customs/IGST valuation on importImport of goods - levy and point of collection of Integrated Goods and Services Tax (IGST) on importation - Whether IGST is payable on procurement of goods from China which are not brought into India but are supplied directly to customers abroad. - HELD THAT: - The Authority examined the definitions and charging provisions in the IGST framework together with the amendments to the Customs Tariff Act and relevant provisions of the Customs Act. From a combined reading it is evident that IGST on imported goods is levied and collected at the point when duties of customs are levied under the Customs Act, i.e., on importation. The CBEC Circular addressing high sea sales clarifies that IGST on imported goods (including chains of high sea sales) shall be levied and collected only at the time of importation and that value additions in intermediate sales form part of the value on which IGST is collected at import clearance. Applying these principles, supplies where the goods never enter India are not subject to IGST in India because the charge arises only upon importation into Indian territory. [Paras 9, 10, 11, 12, 13]IGST is not payable on procurement from China and direct supply from China to overseas customers where the goods do not enter India; IGST is leviable only at the time of importation into India.High Sea Sales and IGST treatment - inclusion of value additions in customs/IGST valuation on import - Whether IGST is payable on sale of goods stored in an overseas (Netherlands) warehouse and sold to customers in and around that country without the goods entering India. - HELD THAT: - The Authority applied the same statutory framework and the CBEC clarification on high sea sales to the warehouse-in-foreign-territory scenario. Since the goods are not imported into India at any stage and the IGST charge in respect of imported goods arises only when import declarations are filed and customs duties are levied in India, supplies effected from an overseas warehouse to overseas customers do not attract IGST in India. The CBEC guidance concerning valuation and chain transactions reinforces that IGST is collected at importation and not on transactions that occur wholly outside Indian territory. [Paras 11, 12, 13]No IGST is payable on sales from the Netherlands warehouse to customers in and around the Netherlands where the goods do not enter India.Final Conclusion: The Authority ruled that IGST is leviable only upon importation into India and, accordingly, the applicant is not liable to pay GST/IGST on (a) supplies procured from China and directly supplied to overseas buyers without entering India and (b) supplies made from goods stored in an overseas warehouse to overseas customers, as those goods are never imported into India. Issues:1. GST liability on goods procured from China but not brought into India.2. GST liability on goods sold from China directly to the USA without entering India.3. GST liability on goods procured from China without specific export orders and not brought into India.4. GST liability on goods sold from a warehouse in Netherlands to customers in and around Netherlands without entering India.Analysis:1. The applicant engaged in trading spices raised issues regarding GST liability on goods procured from China but not brought into India. The Authority analyzed relevant provisions of the IGST Act, Customs Tariff Act, and Customs Act. The ruling stated that IGST is payable at the time of importation of goods into India. Therefore, the goods are liable to IGST when imported into India.2. Regarding the GST liability on goods sold directly from China to the USA without entering India, the ruling clarified that the applicant is not liable to GST on such transactions as the goods are not imported into India at any point. The ruling was based on the principles outlined in Circular No. 33/2017-Customs, which clarified the levy of IGST on high sea sales of imported goods.3. The Authority also addressed the issue of GST liability on goods procured from China without specific export orders and not brought into India. The ruling reiterated that IGST is payable at the time of importation into India. Therefore, the applicant was not liable to GST on such transactions where the goods did not enter India.4. Lastly, the ruling discussed the GST liability on goods sold from a warehouse in Netherlands to customers in and around Netherlands without entering India. The Authority confirmed that the applicant is not liable to GST on these transactions as the goods were not imported into India. The ruling aligned with the principles established in Circular No. 33/2017-Customs regarding the levy of IGST on high sea sales of imported goods.In conclusion, the Authority ruled that the applicant is liable to IGST when goods are imported into India, and GST is payable at the time of importation. The applicant was not liable to GST on transactions where goods did not enter India, following the principles outlined in relevant circulars and Acts.