FTWZ lease exemption applies to DTA imports, and the service-tax bond condition is not required where the lessor pays GST.

A lease of goods that transfers only the right to use, made from an FTWZ to the DTA, falls within Sl. No. 557B of Notification No. 50/2017-Customs where the transaction is covered by item 1(b) or 5(f) of Schedule II of the CGST Act, and IGST exemption is available subject to Condition 102. The exemption is not lost merely because GST on the lease service is discharged by the lessor in India rather than by the lessee, as the notification is aimed at preventing double taxation. In this setting, the bond undertaking for payment of integrated tax on the service is not required, while the remaining safeguards under Condition 102 continue to apply.

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Issues: (i) Whether goods supplied on lease from an FTWZ to DTA qualify for exemption from IGST under Sl. No. 557B of Notification No. 50/2017-Customs dated 30.06.2017; (ii) whether the exemption remains available where GST on the lease service is discharged by the lessor in India and not by the lessee; (iii) whether clause (i) of Condition 102, requiring the importer to execute a bond for payment of tax on the service, stands dispensed with in such a case.

Issue (i): Whether goods supplied on lease from an FTWZ to DTA qualify for exemption from IGST under Sl. No. 557B of Notification No. 50/2017-Customs dated 30.06.2017.

Analysis: Sl. No. 557B grants nil IGST on import of goods under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017, subject to Condition 102. A lease transaction transferring only the right to use goods, without transfer of title, falls within those entries. The goods were stored in an FTWZ, which is a Special Economic Zone, and removal from SEZ to DTA is treated as import into India for customs purposes. The ruling accepted that the physical location of the goods in FTWZ and the nature of the lease transaction bring the case within the exemption entry.

Conclusion: The exemption under Sl. No. 557B is available, subject to compliance with the applicable conditions.

Issue (ii): Whether the exemption remains available where GST on the lease service is discharged by the lessor in India and not by the lessee.

Analysis: Condition 102 contains a proviso for goods supplied by an SEZ Unit to DTA, under which the lessee is relieved from the undertaking to pay integrated tax on the service because the SEZ supplier is already liable to pay tax. The ruling treated the object of the notification as preventing double taxation and held that the fact that GST is paid by the lessor on forward charge does not defeat the exemption. The clarification concerning FTWZ transactions supported extending the benefit to the present arrangement.

Conclusion: The exemption remains available even though GST on the lease service is discharged by the lessor and not the lessee.

Issue (iii): Whether clause (i) of Condition 102, requiring the importer to execute a bond for payment of tax on the service, stands dispensed with in such a case.

Analysis: Since the lessor is liable to discharge GST on the lease service in India, insisting on a further bond from the lessee for the same tax would defeat the object of the exemption and lead to double taxation. The ruling therefore accepted that, in the present factual setting, the bond condition relating to payment of integrated tax on the service is not required, while the remaining safeguards under Condition 102 continue to apply.

Conclusion: Clause (i) of Condition 102 does not apply in the present case.

Final Conclusion: The ruling grants the requested customs exemption for the FTWZ-to-DTA lease transaction and clarifies that the remaining bond-related safeguards, excluding the service-tax undertaking, govern the availment of the benefit.

Ratio Decidendi: A lease of goods in which only the right to use goods is transferred, and which is effected from an FTWZ forming part of SEZ infrastructure to DTA, falls within Sl. No. 557B of Notification No. 50/2017-Customs when the transaction is covered by item 1(b) or 5(f) of Schedule II of the CGST Act and the exemption's anti-double-taxation purpose is otherwise satisfied.

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