2018 (12) TMI 67 - AAR - GST

AAR: No IGST on Goods from Outside India to Outside India

The Authority for Advance Ruling (AAR) determined that the supply of goods moved from a place outside India and delivered to a place outside India is not ... Inter-State supply - place of supply of goods - levy of IGST on imported goods and timing of collection - non-taxable supply / exempt supply - customs clearance as trigger for IGST on importsInter-State supply - place of supply of goods - levy of IGST on imported goods and timing of collection - non-taxable supply / exempt supply - customs clearance as trigger for IGST on imports - Liability to pay IGST on supplies where goods are moved from a place outside the taxable territory and delivered at a place outside the taxable territory under section 7(5)(a) of the IGST Act. - HELD THAT: - The Authority examined Chapter IV and Chapter III of the IGST Act and the proviso to section 5(1). The facts establish that goods are purchased from and delivered by the foreign related entity entirely outside India and never cross the customs frontiers of India. Section 7(2) treats goods imported into India, until they cross the customs frontiers, as inter State supplies; however the proviso to section 5(1) and the Customs Act framework make clear that integrated tax on imported goods is levied and collected in accordance with customs law at the time of import (customs clearance) under section 12 of the Customs Act and section 3 of the Customs Tariff Act. Until goods cross the customs frontiers and import formalities are completed, no IGST is leviable under those provisions. The Authority also relied on administrative clarifications (Circular No. 3/1/2018-IGST and earlier customs guidance on high seas sales) which treat supplies of imported goods prior to customs clearance as not subject to IGST until clearance for home consumption. Applying these legal and administrative provisions to the stated facts, the transactions where goods remain outside India and are delivered outside India are not leviable to IGST and fall within the definition of non taxable / exempt supply for the purposes of the Act until customs importation occurs.Held that such out to out transactions (goods moved from and delivered to places outside the taxable territory without crossing Indian customs frontiers) are not liable to IGST; they are non taxable until and unless customs importation into India occurs.Final Conclusion: The advance ruling holds that supplies where goods are moved from a place outside the taxable territory and delivered at a place outside the taxable territory are not liable to IGST under section 7(5)(a) read with section 5(1) proviso and the customs law; the question of input tax credit does not arise in view of this answer. Issues Involved:1. Applicability of IGST on supply of goods moved from and delivered outside the taxable territory.2. Eligibility of the recipient to avail input tax credit if IGST is applicable.Detailed Analysis:1. Applicability of IGST on Supply of Goods Moved from and Delivered Outside the Taxable Territory:The applicant, Jotun India Private Limited, sought clarification on whether the supply of goods moved from a place outside India and delivered to a place outside India would be liable to tax under section 7(5)(a) of the IGST Act. The applicant contended that such transactions should not be liable to IGST, arguing that the levy of IGST on such transactions would be ultra vires the IGST Act and beyond its territorial jurisdiction. They highlighted that the goods never cross the customs frontiers of India, and thus, the transaction should not be subject to IGST.The Authority for Advance Ruling (AAR) examined the provisions of the IGST Act, particularly section 7(2), which states that supply of goods imported into India, till they cross the customs frontiers of India, shall be treated as inter-State trade or commerce. The AAR noted that the goods in question are delivered from a place outside India to another place outside India without crossing the customs frontiers of India. Consequently, such transactions are not liable to IGST as per the proviso to section 5(1) of the IGST Act, which mandates that IGST on imported goods is levied and collected only at the time of importation into India.Conclusion on Issue 1:The AAR concluded that the supply of goods moved from a place outside India and delivered to a place outside India is not liable to tax in India under section 7(5)(a) of the IGST Act.2. Eligibility of the Recipient to Avail Input Tax Credit if IGST is Applicable:Since the AAR determined that the supply of goods in question is not liable to IGST, the second issue regarding the eligibility of the recipient to avail input tax credit became irrelevant. The recipient's eligibility to claim input tax credit would only arise if the transaction were subject to IGST, which it is not.Conclusion on Issue 2:The question of the recipient's eligibility to avail input tax credit is not relevant as the supply of goods is not liable to IGST.Final Order:- The supply of goods moved from a place outside taxable territory and delivered at a place outside taxable territory is not liable to tax in India under section 7(5)(a) of the IGST Act.- The question of the recipient's eligibility to avail input tax credit is not relevant in light of the above conclusion.