High Sea Sale

[Guest]

Indian Company namely  purchases goods from outside India.  Company ‘B’ purchases on high seas sale from company “A” and sells  to 3^rd company outside India there itself. The goods never arrive in India.  Since company ‘A’ of Indian origin purchases in US Dollar and since Company ‘B’ also an Indian Company purchases on high sea sale from  Company ‘A’, the payment by company ‘B’ to company ‘A’   should be in US dollar as company ‘A’ has purchased in US dollar.  Company ‘B’ will sell the goods outside India in to  a 3^rd country and proceeds received by company in US Dollar.  Both the comopany ‘A’ & ‘B’ have value addition.

Please confirm this is in order.

[Harish Chander Bhatia]

Basically this is back to back transaction. There is a value addition in the books of A , because it purchases the goods while it is on high seas and sell the same to 3rd party. There is no value addition in the books of B, since it has sold the goods to A on high seas , as its normal business  earning normal business profit , and 3rd party is not indian , since all the transaction took place while the goods on high seas, no state VAT, would  charge it to tax. I do not find any infirmity in this type of arrangement.

AI Summary

Back-to-Back High Seas Sales Valid: No VAT for Companies A & B, Transactions in USD and Outside Jurisdiction An Indian company, Company 'A', purchases goods from outside India in US dollars and sells them on a high seas sale to another Indian company, Company 'B'. Company 'B' then sells the goods to a third company outside India, with all transactions occurring while the goods are still on high seas and payments made in US dollars. The forum discussion confirms that this back-to-back transaction is in order, noting that Company 'A' records value addition in its books, while Company 'B' does not, and no state VAT is applicable as the transactions occur outside Indian jurisdiction.