Bill to overseas - ship to India from India

[Shrinivasaraghavan P V]

Dear Sir,

I have the following issue. We produce goods in India and are under Contract Manufacturing Agreement. The buyer/owner is overseas. We have a situation where we have to send the goods to other state in India (Manufacturing Base is in India) and Bill to overseas buyer. Is there a procedure for this. How the foreign currency for the bill be realized. What are the tax implications and how it need to documented. Request expert support on this.

[YAGAY and SUN]

In our view IGST would be applicable in this matter since goods have not been left India.

[Kishan Barai]

IGST would be refunded if you send the goods outside the territory of India.

[Rajagopalan Ranganathan]

Sir,

The supply is within taxable territory (India). Therefore you have to pay CGST + SGST or IGST (if supply is inter- state).. The fact that you are invoicing the customer who is located ovewrseas and remittance is made in convertible foreign currency will not make yoiur supply as export.. According to Section 2 (5) of IGST Act, 2017 “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India; According to Section 2 (6) of IGST Act, 2017 “export of services” means the supply of any service when,––

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

[YAGAY and SUN]

We endorse the views of Experts.

[Praveen Nair]

Hi Experts,

In continuation to the said query, if the material is subsequently exported, by the Manufacturer / Exporter, can the Contract Manufacturer call this as deemed export even though the payment is received from the Overseas Buyer (and not from the exporter). Proof of export can be provided through the Manufacturer / Exporter (even though the material is further processed to make the ultimate product).

Claiming deemed export with LUT supply by the Contract Manufacturer on subsequent supply to the ultimate manufacturer / exporter would help Contract Manufacturer to save on the GST since the value of the goods received from the Overseas Clients is inclusive of GST.

Kindly suggest.

Thanks! Pravin Nair

[YAGAY and SUN]

Deemed Export is well defined in FTP 2015-2020.

AI Summary

IGST applicability for supplies remaining in India: invoicing overseas and foreign remittance do not create an export.
Goods produced under Contract Manufacturing and moved within India but invoiced to an overseas buyer are taxable within India; invoicing to a foreign recipient and receipt in convertible foreign exchange do not convert the transaction into an export. Tax treatment depends on territorial movement: CGST+SGST apply for intra state supplies and IGST for inter state supplies. Export is defined as taking goods out of India; deemed export treatment and relief under the Foreign Trade Policy may be relevant only if subsequent export occurs and documentary and procedural conditions are satisfied.