FTWZ bonded warehouse transactions not exempt under Schedule III CGST Act paragraph 8(a) applies only to Customs Act warehouses

The AAR, Tamil Nadu ruled that bonded warehouse transactions in Free Trade Warehousing Zone (FTWZ) are not covered under Schedule III of CGST Act, 2017. The Authority held that paragraph 8(a) of Schedule III applies specifically to warehouses licensed under Customs Act, 1962, while FTWZ warehouses are governed by SEZ Act, 2005. Therefore, transactions in FTWZ cannot claim exemption under Schedule III. The Authority also noted that IGST Circular No. 3/1/2018 was rescinded by Circular No. 4/1/2019 following amendments to Schedule III.

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Issues Involved:
1. Whether the transfer of title of goods within the FTWZ constitutes a bonded warehouse transaction under Schedule III of the CGST Act, 2017.
2. Applicability of Integrated Tax (IGST) Circular No. 3/1/2018 to the present factual situation.

Issue 1: Transfer of Title of Goods within FTWZ

The applicant sought to determine if the transfer of title of goods to customers or multiple transfers within the Free Trade Warehousing Zone (FTWZ) would result in a bonded warehouse transaction covered under Schedule III of the CGST Act, 2017 r/w CGST Amendment Act, 2018.

The applicant argued that FTWZ is a special category of Special Economic Zone (SEZ) and is equivalent to a bonded warehouse under the Customs Act, 1962. They contended that transfers within FTWZ before clearance for home consumption should fall under Schedule III of the CGST Act, 2017, thereby not attracting GST.

The Central Jurisdiction Officer countered that FTWZ is not a warehouse licensed under the Customs Act, 1962. Therefore, the transactions within FTWZ are not covered under Schedule III of the CGST Act, 2017.

Upon review, the Authority concluded that FTWZ is governed by the SEZ Act, 2005, and not licensed under the Customs Act, 1962. Consequently, transactions within FTWZ are not covered under Schedule III of the CGST Act, 2017.

Ruling: The transfer of title of goods within the FTWZ is not covered under Schedule III of the CGST Act, 2017 r/w CGST Amendment Act, 2018.

Issue 2: Applicability of Integrated Tax (IGST) Circular No. 3/1/2018

The applicant sought to determine if Circular No. 3/1/2018 dated 25.05.2018 is applicable to the present situation.

The applicant argued that the circular clarifies the applicability of IGST on goods supplied while being deposited in customs bonded warehouses, and hence should apply to FTWZ transactions.

The Central Jurisdiction Officer stated that the circular is not applicable to FTWZ, as it is not a warehouse defined under the Customs Act, 1962.

Upon review, the Authority noted that Circular No. 3/1/2018 was rescinded by Circular No. 04/01/2019 following amendments to Schedule III of the CGST Act, 2017.

Ruling: As discussed in para 7.5.1, Circular No. 3/1/2018 is not applicable to the present factual situation.

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