AAR Maharashtra rules no GST on goods supplied outside India to Indian customers without customs clearance under Section 7(2) IGST Act

The AAR, Maharashtra ruled that the applicant is not liable to pay GST on supply of goods located outside India to customers within India without physically bringing the goods to India. The transaction involved back-to-back orders where goods were delivered from outside India to customer's vessel in Singapore, constituting a high seas sale. Since goods did not cross India's customs frontiers, they qualify as inter-state supply under Section 7(2) of IGST Act but are exempt from GST levy until customs clearance per Section 12 of Customs Act and Section 3 of Customs Tariff Act. The supplies constitute non-taxable supply under Section 2(78) of CGST Act.

---

---

Issues Involved:
1. Liability to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.
2. Classification of out & out supplies as export supplies or exempted supplies for GST purposes.

Detailed Analysis:

Issue 1: Liability to Pay GST on Supply of Goods Located Outside India

The applicant, a private limited company, is engaged in trading marine fuel additive chemicals and is an authorized dealer of Innospec Limited, UK. In the specific transaction, the applicant received a purchase order from an Indian company to deliver goods directly to a vessel at Singapore Port. The applicant placed a corresponding order with Innospec Limited, which delivered the goods to the vessel at Singapore. The applicant did not charge GST on the invoice raised to the Indian company, considering the supply to be non-taxable under GST in India.

The applicant contended that GST is not applicable based on the following grounds:
- The supply does not take place in India.
- The transaction is an out & out transaction.
- The place of supply cannot be determined under Sections 10 or 11 of the IGST Act, 2017.
- Section 7(5) of the IGST Act, 2017 is not applicable.
- The goods are not consumed in any state in India.

The jurisdictional officer argued that the delivery of goods was not proven to be outside India and thus liable for GST at 18%.

Observations:

The authority examined the facts and determined that the goods were delivered from outside India to a vessel also located outside India. This transaction is akin to a high seas sale, where goods do not cross the customs frontiers of India. According to Section 7(2) of the IGST Act, 2017, such transactions are considered inter-state supplies. However, as the goods did not cross into India, they are not subject to GST until they clear customs.

Conclusion:

The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.

Issue 2: Classification of Out & Out Supplies for GST Purposes

The applicant argued that the transaction should be considered an out & out transaction, not liable for GST in India. The supply is neither an import nor an export of goods, as the goods remain outside India.

Observations:

The authority referred to Section 7(2) of the IGST Act, which states that goods imported into India are considered inter-state supplies until they cross customs frontiers. Since the goods in question do not cross into India, they are not subject to GST. The transaction is classified as an "exempt supply" under Section 2(47) of the CGST Act, 2017, which includes non-taxable supplies.

Conclusion:

The out & out supplies in the present case are considered "non-taxable supply" as per Section 2(78) of the CGST Act, 2017, meaning they are not leviable to tax under the CGST Act or the IGST Act.

Order:

1. The applicant is not liable to pay GST on the supply of goods located outside India to customers within India without physically bringing the goods to India.
2. The out & out supplies in the present case are classified as "non-taxable supply" under Section 2(78) of the CGST Act, 2017.

---