2021 (12) TMI 1265 - AAR - GST

High Sea Sale & FTWZ imports exempt from CGST, SGST, IGST tax. ITC reversal exception. Inter-state supplies simplified.

The Authority determined that supplying imported goods on High Sea Sale basis or from Free Trade Warehousing Zone does not attract tax under CGST, SGST, ... Entry 8 of Schedule III - supply of warehoused goods before clearance for home consumption - High Sea Sale / supply from FTWZ not leviable to IGST - place of supply is the location of goods when movement terminates - inter-state supply - no reversal of ITC for transactions covered by Schedule III (except Entry 5) under explanation to section 17(3) - no requirement of registration in other State for effecting inter-state suppliesEntry 8 of Schedule III - High Sea Sale / supply from FTWZ not leviable to IGST - Supply of imported goods on High Sea Sale basis or supply of goods from FTWZ facilities to Indian customers liability to IGST - HELD THAT: - The Authority held that the proposed transactions fall within Entry 8 of Schedule III as inserted w.e.f. 1-2-2019, which covers supply of goods by endorsement of document of title after dispatch from port of origin but before clearance for home consumption, and supply of warehoused goods before clearance for home consumption. Transactions covered by Entry 8 of Schedule III do not attract tax under CGST, SGST or IGST. Applying the place of supply rule under Section 10(1)(a) of the IGST Act, when the supplier directs delivery and movement of goods terminates in another State, the location of goods at that time is the place of supply; however, because the transactions are covered by Entry 8 of Schedule III they are not leviable to IGST. [Paras 7, 8]No, such supplies are not subject to IGST.No reversal of ITC for transactions covered by Schedule III (except Entry 5) under explanation to section 17(3) - value of exempted supply - Whether input tax credit already taken must be reversed in respect of the aforesaid supplies if they are not leviable to IGST - HELD THAT: - The Authority relied on the explanation to section 17(3) (inserted w.e.f. 1-2-2019) which provides that transactions falling under Schedule III (other than Entry 5) are not to be treated as exempt supplies for the purposes of reversal of common input tax credit. Since the transactions in question fall under Schedule III Entry 8, their value will not be included in the value of exempt supplies and therefore ITC taken need not be reversed on account of these transactions. [Paras 7, 8]No, reversal of input tax credit is not required.Place of supply is the location of goods when movement terminates - inter-state supply - no requirement of registration in other State for effecting inter-state supplies - issue of invoice and discharge of obligation under section 31 - Whether issuing invoices from the applicant's Hyderabad office for sale of goods from FTWZ facilities in other States satisfies discharge of obligations under section 31 and whether registration in the States where FTWZs are located is required - HELD THAT: - The Authority observed that where the applicant (supplier) is situated in Telangana but the goods are delivered in other States the place of supply is the location where movement of goods terminates, making the transaction an inter-state supply. Given that characterization, the applicant need not obtain registration in the other States merely to effect such inter-state transactions. The application of section 10(1)(a) determines place of supply; the invoice may be issued from the Hyderabad office consistent with that characterisation and the supplier is not required to register in the States where the FTWZ warehouse of the third-party logistics provider is located for the purpose of these transactions. [Paras 7, 8]Issuing invoices from Hyderabad is consistent with the place of supply rule and the applicant need not obtain registration in the States where the FTWZ facilities are located for these inter-state supplies.Final Conclusion: The Authority ruled that the proposed High Sea Sale and FTWZ-origin supplies fall under Entry 8 of Schedule III and are not subject to IGST; ITC already taken need not be reversed in respect of such transactions; the place of supply is the location where movement of goods terminates making the transactions inter-state, and the applicant need not obtain registration in the States where the FTWZ facilities are located to effect these supplies. Issues:1. Determination of liability to IGST on supply of imported goods on High Sea Sale basis or from Free Trade Warehousing Zone (FTWZ).2. Reversal of input tax credit if no IGST liability.3. Qualification of invoice issuance from one office for supplies from FTWZ facilities.4. Requirement of registration in states where FTWZ facilities are located.Analysis:1. The applicant sought clarification on the liability to IGST for supplying imported goods on High Sea Sale basis or from FTWZ. The Authority determined that such transactions fall under Schedule III of CGST/SGST Acts and do not attract tax under CGST, SGST, or IGST Acts. The value of these transactions is not considered as 'value of exempted supply,' as per the explanation to section 17(3) of CGST Act, thereby exempting them from ITC reversal.2. In case of no IGST liability, the issue of reversing input tax credit was raised. The Authority ruled that no reversal of ITC is required for inputs, input services, and capital goods used for the aforementioned supplies, as they are not considered exempt supplies under Schedule III, except for Entry 5.3. The applicant inquired about issuing invoices from their Hyderabad office for supplies from FTWZ facilities in Mumbai and Chennai. The Authority clarified that the place of supply is where the goods are located at the time of delivery to the recipient, making it an inter-state supply. Hence, the applicant does not need registration in other states to carry out such transactions.4. Lastly, the question of obtaining registration in Maharashtra and Tamil Nadu, where the FTWZ facilities are situated, was raised. The Authority reiterated that registration in those states is not necessary as the supplier's location and the place of supply are in different states, constituting an inter-state supply, eliminating the need for additional registrations.In conclusion, the Authority ruled that there is no liability to IGST on the mentioned transactions, no reversal of ITC is required, invoice issuance from one office suffices for inter-state supplies, and registration in states with FTWZ facilities is unnecessary due to the nature of the transactions.