Foreign supplier services qualify for zero-rated GST supply post-February 2019 under Section 16(1)(a) IGST Act

AAR Gujarat ruled on GST liability for services provided to foreign suppliers involving stevedoring, transportation, storage, bagging, and stuffing of temporarily imported goods. The authority determined that since service recipients were located outside India and goods remained in customs bonded warehouses without crossing customs barriers, the place of supply was outside India. However, services were not considered export of services before February 1, 2019, due to physical location requirements under Section 13(3) of IGST Act. Post-February 1, 2019, these services qualified as export of services and became eligible for zero-rated supply under Section 16(1)(a) of IGST Act, 2017.

---

---

Issues Involved:
1. Whether the described services are considered to be Export of Service.
2. Eligibility for Zero Rated Supply under Section 16 of the IGST Act, 2017.

Issue-Wise Detailed Analysis:

1. Whether the described services are considered to be Export of Service:

The applicant, a service provider operating at Kandla port, handles imported fertilizers in bulk for foreign suppliers. The services include stevedoring, transportation, storage, bagging, stuffing, and dispatching the goods which are temporarily imported into India and stored in custom bonded warehouses for export. The applicant sought to determine if these services qualify as export of services under Section 2(6) of the IGST Act, 2017.

To qualify as export of services, the following conditions must be met:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply of service is outside India.
- The payment for such service has been received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

Upon review, the Authority concluded:
- The supplier is located in India.
- The recipient is located outside India.
- Payment is received in convertible foreign exchange.
- The supplier and recipient are not establishments of a distinct person.

However, the place of supply of service was initially determined to be in India as per Section 13(3)(a) of the IGST Act, 2017, which states the place of supply is where the services are actually performed. This meant the services were not considered export of services up to 31.01.2019.

Post 01.02.2019, an amendment to Section 13(3) of the IGST Act included services supplied in respect of goods temporarily imported for any treatment or process and exported after such treatment or process. The Authority found that the applicant's services, involving handling, packing, and dispatching goods, qualify as a "process." Therefore, from 01.02.2019 onwards, the place of supply is the location of the recipient of services, which is outside India, fulfilling all conditions for export of services.

2. Eligibility for Zero Rated Supply under Section 16 of the IGST Act, 2017:

Section 16(1)(a) of the IGST Act defines zero-rated supply as the export of goods or services. Since the applicant's services qualify as export of services from 01.02.2019, they are eligible for zero-rated supply under Section 16 from this date.

Ruling:

Question 1: The services such as stevedoring, transportation, storage, bagging, stuffing, and transportation of goods temporarily imported into India are not considered export of services up to 31.01.2019 but are considered export of services from 01.02.2019 onwards.

Question 2: The applicant is not eligible for zero-rated supply under Section 16 of the IGST Act, 2017, up to 31.01.2019. However, they are eligible for zero-rated supply from 01.02.2019 onwards.

---