Taxability of supplies to vessels and ships under IGST clarified; exempt status denied, with export treatment depending on route adopted.

Supplies made from a customs area to ocean-going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships were treated as taxable inter-State supplies under the IGST framework and were not exempt merely because of the recipient or nature of the vessel. The ruling stated that such outward supplies were neither nil-rated nor exempt by notification, although some transactions may qualify as exports and therefore as zero-rated supply. Where the supplies were taxable, GST could be collected from recipients; for exports, the tax treatment would depend on the export route adopted, including export under bond or on payment of tax.

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Issues: (i) Whether outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships were exempt from GST. (ii) Whether GST could be collected from the recipients if the supplies were taxable and, in case of exports, the applicable manner of tax treatment.

Issue (i): Whether outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships were exempt from GST.

Analysis: Goods supplied from a customs area were treated as supplies in the course of inter-State trade under the IGST framework. The supplies did not qualify as exempt supplies because they were neither nil-rated nor exempted by notification. The ruling also noted that some transactions may at best answer the description of exports and therefore zero-rated supply, but that question was not finally determined in the present ruling.

Conclusion: The supplies were not exempted from GST.

Issue (ii): Whether GST could be collected from the recipients if the supplies were taxable and, in case of exports, the applicable manner of tax treatment.

Analysis: Since the outward supplies were held taxable, GST could be collected from customers. For export transactions, the tax treatment would depend on the manner of export, namely whether export was under bond or on payment of tax.

Conclusion: GST could be collected from the customers where the supplies were not exports, and for exports the applicant could proceed according to the chosen export route.

Final Conclusion: The ruling answered the reference against exemption and recognised taxability of the outward supplies, while leaving export treatment to depend on the mode adopted by the applicant.

Ratio Decidendi: Supplies made from a customs area before goods cross the customs frontiers of India are treated as taxable inter-State supplies under the IGST regime and are not exempt merely because they are made to vessels or government ships.

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