IGST not payable on goods removal from FTWZ to DTA when warehoused in customs bonded warehouse

AAR Tamil Nadu ruled that IGST is not payable on removal of goods from FTWZ to DTA when goods are warehoused in customs bonded warehouse. The applicant imports goods, stores them in FTWZ operated by third party, and clears them for home consumption upon receiving domestic orders. Since goods remain bonded and IGST is paid at clearance under Customs Tariff Act provisions, no additional IGST liability arises under GST law. Circular No. 46/2017 does not apply to warehoused goods deposited in customs bonded warehouse/FTWZ from April 1, 2018 onwards.

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Issues Involved:
1. Whether IGST is payable on goods warehoused in FTWZ and supplied to a DTA unit, in addition to the customs duty payable on removal of goods from the FTWZ unit.
2. Whether Circular No. 46/2017 is applicable to the present factual situation.

Issue-wise Detailed Analysis:

1. IGST Payability on Goods Warehoused in FTWZ and Supplied to a DTA Unit:
The applicant, a multinational financial service provider, imports gold/silver from its London branch and stores it in a Free Trade Warehousing Zone (FTWZ) in India. The goods are stored in the FTWZ under the legal possession of the London branch. When an order is received, the goods are removed from the FTWZ and supplied to the Domestic Tariff Area (DTA) unit of the applicant. The applicant questioned whether IGST should be paid on these goods in addition to the customs duty (Basic Customs Duty + IGST) at the time of removal from the FTWZ.

The ruling clarified that FTWZs are a special category of Special Economic Zones (SEZ) under the SEZ Act, 2005, and that goods stored in FTWZs are treated as bonded warehouse goods. According to Circular No. 3/1/2018-IGST dated 25th May 2018, IGST is levied and collected at the time of final clearance of warehoused goods for home consumption, not at the time of supply while the goods are still in the warehouse. Therefore, the removal of goods from the FTWZ to the DTA unit does not attract IGST under the IGST Act, as the integrated tax is payable only when the goods are cleared for home consumption from the bonded warehouse.

2. Applicability of Circular No. 46/2017:
The applicant also questioned whether Circular No. 46/2017, which deals with the applicability of IGST on goods stored in a customs bonded warehouse, applies to their situation. The ruling referenced the GST Council's 27th meeting and subsequent Circular No. 3/1/2018-IGST, which rescinded Circular No. 46/2017. The new circular clarified that the supply of warehoused goods before their clearance from the warehouse would not be subject to IGST, and the tax would be collected only at the time of final clearance for home consumption.

The ruling concluded that Circular No. 46/2017 is not applicable to the applicant's situation, as the relevant circular in force is Circular No. 3/1/2018-IGST, effective from 01.04.2018, which states that IGST is payable only at the time of clearance of warehoused goods for home consumption.

Ruling:
1. The applicant is not liable to pay IGST at the time of removal of goods from the FTWZ to the DTA under the provisions of the IGST Act, in addition to the duties payable under the Customs Tariff Act, 1975.
2. Circular No. 46/2017 Customs dated 24.11.2017 is not applicable for the supply of warehoused goods deposited in an FTWZ on or after 01.04.2018.

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