2021 (12) TMI 166 - AAAR - GST

Appellate authority upholds IGST payment for international supply transactions outside India.

In Re: M/s. SPX Flow Technology India Pvt. Ltd.,

The appellate authority upheld the ruling that IGST was payable by the appellant on transactions involving the supply of goods from the vendor's premises ... Scope of Supply - import of goods - trading in foreign countries by the appellant, wherein the goods are supplied from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India - applicability of Entry No. 7 in Schedule 3 of the CGST Act, 2017 - levy of IGST - out and out transactions taking place beyond the Customs frontiers of India - location of the supplier - place of supply - HELD THAT:- As per clause (a) of sub-section (1) of Section 10 of the IGST Act, 2017, ‘where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient’. In the present case, the supply involves movement from the premises of the vendor located outside India to the buyer of the appellant located outside India. Therefore, the place of supply in this case is outside India inasmuch as the movement of goods terminates for delivery at the premises of the buyer located outside India - As per clause (24) of section 2 of the IGST Act, 2017, words and expressions used and not defined in this Act (IGST Act, 2017) but defined in the Central Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts. As the supplier (appellant) is located in India and the place of supply is outside India, the transaction of supply of goods to buyer in case of ‘trading in foreign countries’ would be treated as supply of goods in the course of inter-State trade or commerce. As IGST is levied on all inter-State supplies of goods or services or both, (unless exempted or provided otherwise in any other provision of law) as per Section 5 of the IGST Act, 2017, the supply of goods by the appellant to the buyer located outside India is covered under the ambit of the said provision of the IGST Act, 2017. As the transactions of the appellant, wherein the goods are supplied from a place in the non-taxable territory to another place in the nontaxable territory without such goods entering into India, are covered under Entry 7 of Schedule III of the CGST Act, 2017, it is evident that the said transactions shall be treated neither as a supply of goods nor a supply of services with effect from 01.02.2019 - it is observed that various provisions of Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018), including section 32 whereby Paragraph 7 has been inserted in Schedule-III of the CGST Act, 2017, have specifically been declared to come into force with effect from 01.02.2019 vide Notification No. 2/2019-Central Tax dated 29.01.2019. Therefore, the Paragraph 7 of Schedule-III of the CGST Act, 2017 cannot be considered to have retrospective effect as the legislative intent is quite clear. Integrated Goods and Services Tax was payable during the period from 01.07.2017 to 31.01.2019 on supply of goods directly from the vendor’s premises (M/s. SPX Poland) located outside India in the non – taxable territory to the customer’s premises (M/s. BRAC, Bangladesh) located at another place outside India in the non-taxable territory, without such goods entering into India - the supplier (appellant) in this case, who was liable to pay the IGST during relevant period, is located in India. Applicability of section 10 of the IGST Act, 2017 - HELD THAT:- Section 10 of the IGST Act, 2017 is applicable for determining place of supply of goods, other than supply of goods imported into, or exported from India. Thus, the plain reading of section 10 of the IGST Act, 2017 does not support the contention of the appellant. Advance Ruling is confirmed to the extent it has been appeal against, by holding that the Integrated Goods and Services Tax was payable by the appellant M/s. SPX Flow Technology (India) Pvt. Ltd. from 01.07.2017 to 31.01.2019 on supply of goods directly from the vendor’s premises located outside India in the non – taxable territory to the customer’s premises located at another place outside India in the non-taxable territory, without such goods entering into India. Issues Involved:1. Applicability of Entry No. 7 in Schedule 3 of the CGST Act, 2017.2. Liability to pay IGST on out and out transactions beyond the Customs frontiers of India before 01.02.2019.Issue-wise Detailed Analysis:1. Applicability of Entry No. 7 in Schedule 3 of the CGST Act, 2017:The appellant, engaged in trading activities involving direct shipment of goods from Poland to Bangladesh, sought clarity on whether these transactions fall under Entry No. 7 in Schedule 3 of the CGST Act, 2017. The GAAR concluded that transactions from 01.02.2019 onwards are covered under Entry No. 7 of Schedule III, which states, “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.” Consequently, no GST is leviable on such transactions from 01.02.2019 onwards.2. Liability to Pay IGST on Out and Out Transactions Beyond the Customs Frontiers of India Before 01.02.2019:The appellant contested the GAAR's ruling that IGST was payable on transactions before 01.02.2019. The GAAR had held that the appellant, acting as a supplier, is liable to IGST on these transactions as they are considered inter-state supplies under Section 7(5) of the IGST Act, 2017. The appellant argued that they are not an agent under Section 2(5) of the CGST Act, 2017, and thus not a supplier. They also contended that the IGST Act applies only within the taxable territory of India and cited judgments from the Gujarat High Court and the Supreme Court to support their stance.The appellate authority examined the provisions of Section 5 and Section 7 of the IGST Act, 2017, and the definitions of 'supplier' and 'supply' under the CGST Act, 2017. It was determined that the appellant, whose principal place of business is in India, is considered a supplier. The authority noted that IGST is levied on all inter-state supplies unless exempted. The insertion of Entry No. 7 in Schedule III of the CGST Act, 2017, effective from 01.02.2019, does not have retrospective effect. Hence, IGST was payable on such transactions from 01.07.2017 to 31.01.2019.The authority also addressed the appellant's reliance on the Mohit Minerals Pvt. Ltd. and SAL Steel Ltd. cases, clarifying that these judgments were not applicable as they pertained to different factual situations involving services, not goods. Furthermore, Section 10 of the IGST Act, 2017, was found applicable for determining the place of supply of goods, contrary to the appellant's claims.In conclusion, the appellate authority confirmed the GAAR's ruling, holding that IGST was payable by the appellant on the supply of goods directly from the vendor's premises outside India to the customer's premises outside India, without the goods entering India, for the period from 01.07.2017 to 31.01.2019.