2019 (10) TMI 1138 - AAR - GST

Supply of stores to foreign vessels not zero-rated unless for location outside India. Applicant liable under GST/IGST Acts.

The Authority ruled that the Applicant's supply of stores to foreign going vessels is not zero-rated unless designated for a location outside India, ... Export - zero-rated supply - place of supply located outside India - warehoused goods - customs area - taking on board foreign going vessel as stores - IGST Act definition of exportExport - zero-rated supply - place of supply located outside India - IGST Act definition of export - Whether supplies of stores to foreign going vessels anchored in India constitute export and are zero-rated supplies under the GST/IGST law. - HELD THAT: - The Authority held that export under the IGST Act (and the Customs Act) means taking goods from India to a place outside India; accordingly, the place of supply must be a location outside India. A foreign going vessel that is anchored within the territory of India does not constitute a place outside India, and taking stores on board such a vessel while both supplier and recipient are located in India does not amount to supply to a location outside India. Consequently, such supplies cannot be treated as export or as zero-rated supplies unless the goods are specifically marked for a location outside India. The Authority rejected the contention that crossing the customs area or the provisions permitting warehoused goods to be taken on board a vessel for export convert such supplies into export for the purposes of the IGST Act. [Paras 3]Supply of stores to foreign going vessels anchored in India is not export or a zero-rated supply under the GST/IGST law unless the goods are specifically marked for a location outside India; tax is payable under the GST/IGST as applicable.Warehoused goods - customs area - taking on board foreign going vessel as stores - Whether the Customs Act provisions relating to warehoused goods and exemption from import duty when taken on board a foreign going vessel render such supplies exported for GST purposes. - HELD THAT: - The Authority observed that the Customs Act provisions (sections permitting warehoused goods to be taken on board as stores without import duty) are a special customs facility distinct from the IGST/ export concept. Those provisions are relevant only where the stores are warehoused goods and do not alter the IGST Act requirement that export involve taking goods to a place outside India. The fact that warehoused goods cross the limits of the customs area when taken on board does not, by itself, make the supply an export under the IGST Act. The Applicant did not establish that its supplies were restricted to warehoused goods or were marked for export to a foreign destination; therefore the Customs Act exemptions do not render the supplies zero-rated for GST purposes. [Paras 3]Customs Act provisions regarding warehoused goods and exemption from import duty do not convert supplies of stores to foreign going vessels into exports for GST/IGST purposes unless the goods are warehoused and specifically marked for a location outside India.Final Conclusion: The Authority ruled that supplies of stores to foreign going vessels anchored in India are not exports or zero-rated supplies under the GST/IGST law unless the goods are specifically marked for a location outside India; accordingly, the applicant is liable to pay tax on such supplies under the GST Act or the IGST Act, as applicable. Issues:1. Admissibility of the Application2. Submissions of the Applicant and the Revenue3. Observations & findings of the AuthorityAdmissibility of the Application:The Applicant sought a ruling on the tax liability for supplying stores to foreign going vessels and whether such supplies are zero-rated. The application was admitted as the question raised fell under Section 97(2)(e) of the GST Act and had not been decided by any authority under the CST Act. The concerned Revenue officer did not object to the admission.Submissions of the Applicant and the Revenue:The Applicant argued that provisions of the IGST Act and the Customs Act indicate that supplying stores to foreign going vessels qualifies as export and zero-rated supply. Reference was made to a ruling by AAR, Andhra Pradesh, supporting this view. The Revenue officer concurred with the Applicant's interpretation.Observations & findings of the Authority:The Authority analyzed the definitions and provisions of the Customs Act regarding warehoused goods and their export. It was determined that supplying stores to foreign going vessels does not constitute export unless specifically marked for a location outside India. The Authority highlighted the distinction between export under the Central Sales Tax Act and the IGST Act, emphasizing the narrower scope of export under the latter. The ruling of AAR, Andhra Pradesh, was deemed irrelevant as the Applicant's case differed significantly. Ultimately, the Authority ruled that the Applicant's supply of stores to foreign going vessels is not zero-rated unless designated for a location outside India, making the Applicant liable to pay tax under the GST or IGST Act.In conclusion, the Authority clarified that unless the stores supplied to foreign going vessels are expressly marked for a location outside India, such transactions do not qualify as zero-rated supplies. The judgment emphasized the specific criteria for export under the GST and IGST Acts, highlighting the need for a distinct provision to exempt imported stores supplied to foreign going vessels from tax liability. The ruling provided a detailed analysis of the legal framework and previous decisions to support the decision, ensuring clarity on the tax implications of supplying stores to foreign going vessels.