Railway freight for petroleum transport to export warehouse constitutes inter-state supply under GST Act section 25(4), not zero-rated export

The AAAR upheld the advance ruling that railway freight for transporting petroleum products from Haldia Refinery to Raxaul export warehouse constitutes inter-state supply to a distinct person under GST Act section 25(4), not export. The movement terminated at Raxaul where the Bihar unit prepared ARE-I for actual export to Nepal. Since goods were supplied to the recipient in India and final export clearance occurred from Raxaul, the transportation could not be considered zero-rated export supply under IGST Act, making input tax credit on freight unavailable.

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Issues Involved
1. Whether GST paid on the railway freight for transportation of refining crude petroleum oil from Haldia Refinery to the export warehouse at Raxaul can be availed as Input Tax Credit.
2. Classification of supplies from Haldia to Raxaul as zero-rated or non-taxable.
3. The linkage of goods movement from Haldia to Raxaul with the ultimate export to Nepal.
4. The interpretation of the agreement between IOCL and NOC regarding the supply and export of POL products.

Detailed Analysis

Issue 1: Input Tax Credit on Railway Freight
The appellant sought an advance ruling on whether GST paid on railway freight for transporting refining crude petroleum oil, including products like High-Speed Diesel (HSD), Motor Spirit (petrol), and Aviation Turbine Fuel (ATF), from Haldia Refinery to the export warehouse at Raxaul can be availed as Input Tax Credit (ITC). The West Bengal Authority for Advance Ruling (WBAAR) ruled that the appellant cannot claim credit of the GST paid on the railway freight for transportation of ATF and other non-taxable supplies from West Bengal to the Bihar Unit, as these are not zero-rated supplies but non-taxable supplies to a distinct person under Section 25(4) of the GST Act.

Issue 2: Classification of Supplies
The appellant argued that the supplies from Haldia to Raxaul should be considered zero-rated under Section 16(1)(a) of the IGST Act, as they are inextricably linked to the ultimate export to Nepal. The WBAAR, however, held that these supplies are non-taxable under Section 2(78) of the CGST Act and not zero-rated supplies, as the movement of goods terminates at the Raxaul warehouse, which is a distinct person under Section 25(4) of the GST Act.

Issue 3: Linkage to Ultimate Export
The appellant contended that the movement of goods from Haldia Refinery to the Raxaul export warehouse is inextricably linked to the ultimate export to Nepal, supported by the agreement with NOC, which mandates that the products be dispatched from Haldia and sold to NOC free of Indian duties and taxes. The WBAAR, however, concluded that the movement from Haldia to Raxaul is not inextricably linked to the ultimate export, as the goods could be diverted for home consumption and the Raxaul warehouse is considered a distinct person under the GST Act.

Issue 4: Agreement Interpretation
The appellant emphasized clauses in the agreement with NOC that indicate the products are meant for export to Nepal, including the execution of a B-3 bond and the issuance of certificates in Form CT-2 for procurement of excisable goods. The WBAAR found that the agreement with NOC is an umbrella agreement and not an export order, with specific Product Delivery Orders (PDO) raised by NOC being the actual export orders. The final clearance of goods for export occurs from the Raxaul unit, not the Haldia unit, and the movement of goods terminates at the Raxaul warehouse, making it an inter-state supply to a distinct person under Section 25(4) of the GST Act.

Conclusion
The Appellate Authority upheld the WBAAR's ruling, concluding that the movement of goods from Haldia to Raxaul is not zero-rated but non-taxable supplies to a distinct person under the GST Act. Consequently, the appellant cannot claim ITC on the GST paid for the railway freight. The appeal was dismissed, affirming that the final clearance for export takes place from the Raxaul unit, and the movement of goods from Haldia to Raxaul is not inextricably linked to the ultimate export to Nepal.

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