GST not applicable on sale of warehoused goods in Free Trade Warehousing Zone under MOOWR Scheme

AAR Tamil Nadu ruled that GST is not leviable on sale of goods warehoused in third-party Free Trade Warehousing Zone to customers who clear goods to bonded warehouse under MOOWR Scheme on "as is where is" basis. The transaction falls under Schedule III clause 8(a) of CGST Act 2017, which exempts supply of warehoused goods before clearance for home consumption. FTWZ being part of SEZ scheme constitutes customs bonded warehouse where imported goods remain duty-free until cleared for domestic consumption.

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Issues Involved:
1. Whether GST is leviable on the sale of goods warehoused in a third-party Free Trade Warehousing Zone (3P FTWZ) on "as is where is" basis to a customer who clears the same to a bonded warehouse under the MOOWR Scheme.

Summary:

Issue 1: GST Levy on Sale of Warehoused Goods
Facts and Circumstances:
- The applicant, M/s. Sunwoda Electronic India (P) Ltd., imports Portable Lithium System Batteries and stores them in a 3P FTWZ.
- The goods are sold to an OEM's MOOWR unit while still warehoused.
- The applicant sought an advance ruling on whether GST is leviable on such sales.

Applicant's Argument:
- The applicant argued that the sale of warehoused goods to an OEM's MOOWR unit is covered by Para 8(a) of Schedule III of the CGST Act, 2017, which states that the "Supply of warehoused goods to any person before clearance for home consumption" is neither a supply of goods nor a supply of services.
- They referenced CBIC Circular No. 48/2020-Customs and Rule 46(13) of the SEZ Rules, 2006, which allow the transfer of goods from FTWZ to a bonded warehouse without payment of duty.
- They also cited various legal precedents and rulings supporting their stance.

Legal Provisions and Findings:
- Section 2(n) and Section 2(za) of the SEZ Act define FTWZ as part of SEZ, which is deemed to be outside the customs territory of India.
- Section 53 of the SEZ Act states that SEZs are considered outside the customs territory for authorized operations.
- Section 51 of the SEZ Act gives it an overriding effect over other laws.
- CBIC Circular No. 3/1/2018-IGST clarified that integrated tax is levied only when warehoused goods are cleared for home consumption.
- Amendment to Schedule III of the CGST Act, effective from 01.02.2019, explicitly states that the supply of warehoused goods before clearance for home consumption is neither a supply of goods nor a supply of services.

Ruling:
- The Authority ruled that GST is not leviable on the sale of goods warehoused in 3P FTWZ on "as is where is" basis to a customer who clears the same to a bonded warehouse under the MOOWR Scheme.
- The transaction is covered under Para 8(a) of Schedule III of the CGST Act, 2017.

Conclusion:
GST is not applicable on the sale of warehoused goods in a 3P FTWZ to a customer who clears them to a bonded warehouse under the MOOWR Scheme, as per the provisions of Para 8(a) of Schedule III of the CGST Act, 2017.

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