Tax on Inbond sales-reg

[N Balachandran]

Sir,

We are Chennai based company and received the order from Customer who is located in Karnataka for supply of goods to be procured from outside India. The condition given by Customer is this goods are eligible for import under Project imports against the project authority Certificate to be issued by them.

We plan to import goods against their order and keep it in the bonded warehouse by filing Warehouse Bill of Entry in our Name and subsequent selling to Customer from Bondedwarehouse.

The Customer will file the Ex bond bill of entry in their name and get it assessed on the value of Foreign Supplier.

We will raise the commercial invoice on Customer for the value at least 25% higher than the Foreign vendor value.

In the above situation , i would like to seek your expert opinion on the following:

1. Will the sale qualify for sales tax exemption under section 5(2) of CST act?

2. Will attract any Sales tax or not?

3. Duty Assessed on the value of Foreign supplier is Correct as per the customs valuation rules

4. Commercial invoice being raised on Customer with higher value than the imported value is acceptable

I shall be thankful if you could kindly clarify the above with relevant provisions and judgement pl

Regards

N.Balachandran

[Rama Krishana]

You have mixed two issues having different scope.

One is for Customs - it involves warehousing, valuation and rate of duty.

Second is for VAT - levy of vat on clearance of warehoused goods.

As long as first situation is there, you / buyer will be required to pay the customs duty as the rate of duty and value of goods as applicable on the date of filing of bill of ex-bond bill of entry - Please read section 14, section 15 and section 68 of the Customs Act, 1962 act in this regard.

Whereas the second question is there, since the sale is made after entering the goods within India, is would not be exempt from CST / VAT in terms of section 5(2) of CST act? However, it is a preliminary view only. A detailed study and scrutiny of your purchase agreement may drive us different direction.

AI Summary

Customs valuation determines duty at ex-bond entry date; sale from bonded warehouse may not attract CST exemption. Customs duty and valuation are determined at the time the ex-bond bill of entry is filed, so assessment reflects the foreign supplier's value and duty rate applicable on that date. A sale made after goods have been entered into India from a bonded warehouse is provisionally treated as not exempt under section 5(2) of the CST Act; contractual terms should be examined to confirm VAT/CST liability and whether invoicing above the imported value affects tax treatment.