Books supplied from USA warehouse to international customers without entering India not taxable under GST Schedule III

The AAR Karnataka ruled on GST implications for book supply operations between non-taxable territories. Supply of books from USA warehouse to customers in USA, UK, and Canada without entering India does not constitute supply under GST per Schedule III clause 7. However, shipping charges collected by the applicant are taxable under Reverse Charge Mechanism as import of services. Printing charges for books where applicant supplies content are also taxable under RCM. Warehousing services in USA are not taxable as place of supply is outside India. Input tax credit cannot be availed on transactions not constituting supply under GST.

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Issues Involved:
1. Supply of books from a warehouse in the USA to customers in the USA, UK, and Canada.
2. GST on shipping charges collected for delivery of books from the USA warehouse.
3. Taxability under Reverse Charge Mechanism (RCM) for printing charges by a printer in the USA.
4. Taxability under RCM for warehousing services in the USA.
5. Eligibility to avail input tax credit for transactions covered in the first issue.

Detailed Analysis:

1. Supply of Books from USA Warehouse:
The applicant sought clarification on whether the supply of books from a warehouse in the USA to customers in the USA, UK, and Canada without the books entering India constitutes a supply under GST. The judgment referenced Schedule III, clause 7 of the CGST Act 2017, which states that "Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India" is neither a supply of goods nor services. Thus, the supply of books from the USA warehouse to customers in non-taxable territories does not amount to a supply under GST.

2. GST on Shipping Charges:
The applicant collects shipping charges from customers for delivering books from the USA warehouse. The ruling clarified that since the actual shipping occurs outside India (a non-taxable territory), the shipping charges collected are not subject to GST. However, the applicant is in receipt of the shipping service from an agent outside India, and as per Section 13 of the IGST Act 2017, this qualifies as an import of service. Consequently, the amount paid for the shipping service is taxable under the Reverse Charge Mechanism (RCM).

3. Printing Charges under RCM:
The applicant supplies content to a printer in the USA, who prints the books and moves them to a warehouse. According to Circular No. 11/11/2017-GST, the supply of printed books where the content is supplied by the recipient is a composite supply, with the principal supply being the printing service. As the supplier of the printing service is outside India and the recipient (applicant) is in India, the place of supply is in India per Section 13 of the IGST Act. Therefore, the printing charges are taxable under RCM.

4. Warehousing Services under RCM:
The applicant uses warehousing services for printed books in the USA. The ruling examined whether this service qualifies as an import of service. Since the supplier and place of supply are outside India, it does not meet the criteria for an import of service under Section 2(11) of the IGST Act. Hence, warehousing services are not taxable under RCM.

5. Input Tax Credit:
Regarding the eligibility to avail input tax credit for transactions covered in the first issue, the judgment stated that since the supply of books from one non-taxable territory to another does not constitute a supply under GST, the applicant is not entitled to input tax credit on inputs and input services related to this transaction.

Ruling:
1. The supply of books from the USA warehouse to customers in the USA, UK, and Canada without entering India does not amount to a supply under GST.
2. Shipping charges collected for delivery from the USA warehouse to customers in non-taxable territories are not subject to GST.
3. Printing charges by a printer in the USA are taxable under RCM.
4. Warehousing services in the USA are not taxable under RCM.
5. Input tax credit cannot be availed for transactions covered in the first issue as they do not amount to a supply under GST.

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