2025 (9) TMI 918 - AAR - GST

Export of pre-packaged labelled rice up to 25kg taxable at IGST 5% if supplier opts; 0.1% concessional possible

AAR held that export of pre-packaged, labelled rice up to 25 kg is taxable at IGST 5% (or GST 5% where applicable) if the supplier opts for that route, ... Levy of GST - export of pre-packaged and labelled rice upto 25 kgs to foreign buyer - supply of pre-packaged and labelled rice upto 25 kgs to exporter on ‘bill to ship to” basis - supply of prepackaged and labelled rice upto 25 kgs, to the factory of exporter - goods procured from other party at concessional rate of 0.1% (0.05% + 0.05%) as per N/N. 40/2017 or N/N. 41/2017? Whether GST would be leviable on the export of pre-packaged and labelled rice upto 25 kgs to a foreign buyer? - HELD THAT:- As the applicant has on record said that they are engaged in supplying rice in pre-packaged & labelled packages having quantity of upto 25 kgs, in terms of section 5 of the IGST Act, 2017, if the applicant opts for other option, he is liable to pay IGST @ 5% in terms of N/N. 1/2017-IT (R) dtd. 28.06.2017, as amended. It may be noted that this is subject to the condition that the pre-packaged & labelled packages of rice exported by the applicant, fall within the expression ‘pre-packaged & labelled’ defined under the explanation to the notification. Whether GST would be applicable on supply of pre-packaged and labelled rice upto 25 kgs to exporter on ‘bill to ship to’ basis ie bill to exporter and ship to customs port, wherein the exporter ultimately exports the rice to a foreign buyer? - HELD THAT:- The applicant is liable to pay GST @ 5% in terms of N/N. 1/2017-CT (R) dtd. 28.06.2017, as amended or IGST @ 5% in terms of N/N. 1/2017-IT (R) dtd. 28.06.2017, as amended. Further, for inter-state/intra-state supply of pre-packaged and labelled rice upto 25 kgs to exporter on ‘bill to ship to’ basis ie bill to exporter and ship to customs port, wherein the exporter ultimately exports the rice to foreign buyer, the benefit of N/N. 41/2017-IT (R) dated 23.10.2017 /N/N. 40/2017-CT(R) dated 23.10.2017, which provides for IGST @ 0.1% or GST @ 0.1%, is also available to the applicant, subject however, to adherence of the terms and conditions of the notification, as mentioned therein. Whether GST would be applicable on supply of prepackaged and labelled rice upto 25 kgs, to the factory of exporter, who will export the rice? - HELD THAT:- The applicant is liable to pay GST @ 5% in terms of N/N. 1/2017-CT (R) dtd. 28.06.2017, as amended or IGST @ 5% in terms of N/N. 1/2017-IT (R) dtd. 28.06.2017, as amended, subject to the condition that the pre-packaged & labelled packages of rice exported by the applicant, fall within the expression ‘pre-packaged & labelled’ defined under the explanation to the notification. Whether GST would be applicable on goods procured from other party at concessional rate of 0.1% (0.05%+0.05%) as per N/N. 40/2017-CT(R) or 41/2017-IT(R) both dtd. 23.10.2017 & export the goods directly to foreign buyers for prepackaged and labelled rice upto 25 Kgs at 5%? - HELD THAT:- There was a restriction in claiming refund of IGST paid on goods exported under the erstwhile Rule 96(10) ibid, if the benefit of Nos. 48/2017-CT dated the 18.10.2017, 40/2017-CT (R) dated 23.10.2017, 41/2017-IT(R) dated 23.10.2017, 78/2017-Customs dated 13.10.2017 or 79/2017-Customs dated 13.10.2017 have been availed. It is found that in Circular No. 45/19/2018-GST dtd. 30.05.2018, CBIC while clarifying the scope of the restriction imposed by Rule 96(10), has stated that Rule 96(10) seeks to prevent an exporter, who is receiving goods from suppliers availing the benefit of certain specified notifications, under which they supply goods without payment of tax or at reduced rate of tax, from exporting goods under payment of integrated tax. However, it is found that this sub-rule 10 has been omitted vide N/N. 20/2024-CT dtd. 08.10.2024 and therefore, the restriction now no longer exists. Therefore, the applicant is not precluded from exporting the goods under payment of integrated tax and is liable to pay IGST @ 5% in terms of N/N. 1/2017-IT (R) dtd. 28.06.2017, as amended, even if they have availed the benefit of N/N. 40/2017-CT(Rate) or notification No. 41/2017-IT(Rate), both dated 23-10-2017. ISSUES PRESENTED AND CONSIDERED 1. Whether GST is leviable on export of pre-packaged and labelled rice of up to 25 kg where the exporter elects to export on payment of IGST. 2. Whether GST is leviable on supply of pre-packaged and labelled rice of up to 25 kg to an exporter on 'bill to - ship to' basis (bill to exporter; ship to customs port) where the exporter ultimately effects export. 3. Whether GST is leviable on supply of pre-packaged and labelled rice of up to 25 kg when supplied to the factory of an exporter who will effect export. 4. Whether a supplier who procured pre-packaged and labelled rice of up to 25 kg at concessional GST rates available under notifications permitting supply at 0.1% (0.05% CGST + 0.05% SGST / 0.1% IGST) is precluded from exporting the same on payment of IGST @ 5% (and claiming refund) or otherwise liable to pay GST @ 5% on export. ISSUE-WISE DETAILED ANALYSIS Issue 1: GST on export of pre-packaged and labelled rice up to 25 kg when exporter elects to pay IGST Legal framework: Section 16 (definition of 'zero rated supply' and options for exports) of the IGST Act; Notification prescribing rates, including entry for 'Rice [pre-packaged and labelled]' at 5% in Schedule (Notification No. 1/2017-Rate as amended); Explanation defining 'pre-packaged & labelled' with reference to Legal Metrology Act. Precedent treatment: No judicial precedents were cited or relied upon in the reasoning. Interpretation and reasoning: Exports are zero-rated under section 16, which provides two alternatives - export under bond/LUT without payment of IGST and claim of refund of unutilised ITC, or export on payment of IGST and claim refund of IGST. Notification classifying pre-packaged and labelled rice at 5% applies if the exported packages fall within the statutory Explanation (i.e., commodities intended for retail sale, pre-packed as defined, and requiring Legal Metrology declarations). If the supplier opts for export on payment of IGST, the specified rate (5%) applies to such pre-packaged & labelled rice. Ratio vs. Obiter: Ratio - export on payment of IGST is taxable at the rate specified in the notification if the goods satisfy the notification's definition. Obiter - none beyond statutory interpretation. Conclusion: If the exporter elects to export on payment of IGST, GST @ 5% is leviable on export of pre-packaged and labelled rice up to 25 kg, subject to the package meeting the notification's definition. Issue 2: GST on supply to exporter on 'bill to - ship to' basis Legal framework: Notification No. 1/2017-Rate (Schedule entry for pre-packaged & labelled rice at 5%); Notifications No. 40/2017 (intra-State concessional supply to exporter at 0.05% CGST) and No. 41/2017 (inter-State concessional supply to exporter at 0.1% IGST) with conditions; section 16 (zero-rated supplies). Precedent treatment: No precedents cited. Interpretation and reasoning: Supply on bill to-ship to basis to an exporter who ultimately exports falls within the statutory zero-rated regime. Such supply may be taxed at 5% under the rate notification if the supplier or the supplier elects to treat the supply as taxable at the notification rate. Alternatively, subject to strict compliance with the terms and conditions of Notifications No. 40/2017 / 41/2017 (e.g., tax invoice, export within 90 days, GSTIN disclosure in shipping bill, registration with recognised export body, movement directly to port or registered warehouse, documentary proof), the concessional rate of 0.1% (aggregate) is available for supplies destined for export. Ratio vs. Obiter: Ratio - both the 5% rate (when supply is treated/taxed under rate notification) and concessional 0.1% benefit (subject to conditions of notifications) are available for bill to-ship to supplies that ultimately get exported; applicability depends on fulfillment of notification conditions and the supplier's choice. Conclusion: GST @ 5% applies where the supplier exports on payment of IGST; alternatively, concessional IGST/GST @ 0.1% is available for inter-state/intra-state supplies to an exporter on bill to-ship to basis provided all conditions of Notifications No. 41/2017 / 40/2017 are complied with. Issue 3: GST on supply to the factory of an exporter who will export Legal framework: Same as Issue 2 (rate notification and zero-rated/export regime; definition of 'pre-packaged & labelled'). Precedent treatment: No precedents cited. Interpretation and reasoning: Supply of pre-packaged and labelled rice up to 25 kg to the exporter's factory, where the exporter effects export, is captured by the export/zero-rated regime. If the supplier elects to export on payment of IGST, the applicable rate for such goods is 5% under the rate notification (subject to the goods meeting the 'pre-packaged & labelled' definition). The concessional notifications may also be available depending on supply circumstances and adherence to their terms. Ratio vs. Obiter: Ratio - exportable supplies to the exporter's factory are taxable at 5% on payment of IGST if the goods meet the notification definition; concessional route remains subject to notification conditions. Conclusion: GST @ 5% applies on supply to the exporter's factory if export is effected on payment of IGST and the goods fall within the notification's definition. Issue 4: Effect of prior procurement at concessional rate (0.1%) on ability to export on payment of IGST @ 5% Legal framework: Notifications No. 40/2017 and 41/2017 providing concessional intra/inter-state supply to exporters; Rule 89(4A)/(4B) and Rule 96(10) of the CGST/IGST Rules as amended/omitted by Notification No. 20/2024 (omission of sub-rules and restriction); Section 16 (zero-rated supplies); CBIC Circular No. 45/19/2018-GST (interpretative guidance on then-existing restriction). Precedent treatment: No judicial precedents cited; administrative circular referenced for historical position. Interpretation and reasoning: Historically, Rule 96(10) and related administrative guidance sought to prevent exporters who procured goods at concessional or nil tax under specified notifications from exporting the same on payment of IGST (to claim refund) - i.e., a restriction on exporting under payment of IGST after availing specified concessions. However, Notification No. 20/2024 omitted sub-rule 4A, 4B of Rule 89 and sub-rule 10 of Rule 96, thereby removing that restriction. In the absence of the restriction, a supplier who procured goods at concessional rates under Notifications No. 40/41/other specified notifications is not precluded from subsequently exporting the goods on payment of IGST @ 5% and claiming refund, provided the goods meet the rate-notification definition and applicable conditions. The applicant's commercial rationale (availability of higher-rate input services and preference for IGST route because of quicker automatic refunds) is noted as a practical consideration but the ruling is grounded on the removal of the statutory/administrative restriction. Ratio vs. Obiter: Ratio - omission of the restrictive sub-rules means suppliers who procured goods at concessional rates under specified notifications may export on payment of IGST @ 5% (and claim refund) provided notification conditions and definitions are met. Obiter - commentary on exporters' commercial considerations and refund timelines. Conclusion: The prior procurement availing Notifications No. 40/2017 or 41/2017 does not bar the supplier from exporting the same pre-packaged & labelled rice on payment of IGST @ 5% following the omission of the restrictive sub-rules; compliance with notification conditions and the 'pre-packaged & labelled' definition remains necessary. Alternatively, the supplier may export under bond/LUT without payment of IGST as provided by section 16. Cross-reference and overarching point All conclusions in Issues 1-4 are qualified by the consistent requirement that the packages of rice must fall within the Explanation to the rate notification defining 'pre-packaged & labelled' (i.e., intended for retail sale, not more than 25 kg, pre-packed as per Legal Metrology Act, and bearing required declarations); applicability of concessional notifications depends on strict adherence to their enumerated conditions.