Applicablity of Rental Service provided to a Transit good which was originated at Japan, store for temporary period at Indian port and again re exported to Dubai

[Guest]

Dear Sir/Madam,

In regard to subject kindly guide whether GST is applicable or not.

Fact of transaction We ,are a bonded warehouse located at Kandla Port.

One of our client a foreign company, Dubai based imported Chemical from Japan and store at our bonded warehouse at Kandla port , we enter into rental agreement for storing his chemical at Kandla.

The said chemical was store for period of one month. The same chemical parcel was re-exported to Dubai by the foreign cl ient without entering home market

Now we are billing to foreign client for rental service for the storage of parcel. Now question arises whether such type of service provided at Indian port bonded warehouse GST is to be charged or not or service is exempted . If applicable what type of GST ( igst /c+s gst)

Kindly guide

[KASTURI SETHI]

Dear Querist,

You are charging godown rent for the period the goods remained in the godown. It is taxable service under HSN 997212 and GST is payable @18%. (CGST : 9% and SGST : 9%).

The following decision of AAR, (Gujarat) will somewhat help you to arrive at concrete decision :-

2018 (14) G.S.T.L. 121 (A.A.R. - GST) = 2018 (6) TMI 1195 - AUTHORITY FOR ADVANCE RULING - GUJARATIN RE : RISHI SHIPPING

[Guest]

Dear Sir,

The case which was quoted was in relation to Classification of Service, whether it is ‘Rental or leasing services involving own or leased non-residential property’ (Service Accounting Code - 9972

or

storage or warehousing’ service .

My question was

Good has not enter for home consumption in India. It has been kept at a Bonded ware house at Kandla Port for 1 month by a client located at Dubai. From Bonded ware house at Kandla port, it was reexported to another country( UAE) Dubai.I am the owner of Bonded Warehouse . I have to collect the storage charges.

Whether service provided by bonded ware house at Indian port to Dubai based company is liable to GST ? or since good doesnot enter India GST is not leviable on the services provided? or if applicable whether C+Sgst or IGST.

Please guide.

[KASTURI SETHI]

Dear Sh.Prasad Ji, I have posted the case law in order to understand the situation. This case law is not fully applicable to the situation explained by you. In my view, this situation consists of two components . 1.Supply of service 2 Supply of goods for re-export. In the first situation, you have provided/supplied rewarehousing services (rental) and charged the amount (consideration) for one month. In this instance, place of supply is in taxable territory (India) and within same State. It is not export of service. Hence CGST and SGST payable. Re-export of goods is another aspect in this situation and both the situations should not be intermingled. This is my view.

[KASTURI SETHI]

In continuation if my reply dated 24.1.19, I further add as under:- . An An warehouse is a immovable property. Thus warehousing services being based on immovable property, these services have been supplied in the same State , received, consumed & enjoyed in India (same State), GST destination and consumption based. Thereafter, the goods left India for a foreign country. In this way, a line has to be drawn between supply of services and supply of goods.

[Alkesh Jani]

Sir,

In this regards, my point of view is that, as per the latest amendment in the Customs Act, Bonded warehouse are included in the definition of Customs Area, therefore, if goods does not crosses the customs frontiers, they cannot be said to be imported goods. Here, it is also important to note that the title of goods are held by the foreign party, therefore, question relating to goods does not arises.

Moreover, in respect of query, the renting of immovable property (ware housing service) is very well covered by the Section 13 (4) of IGST Act, 2017, as location of immovable property is India (as per the definition “India” includes territorial water), therefore, although immovable property is as Customs Area, As rightly viewed by Sh. Kasturiji Sir, CGST + SGST is applicable for the services rendered.

Any different view is highly solicited.

Thanks,

With regards,

[Guest]

In regards to above subject , had instead of renting of immovable property( ware housing services), our service fall under cargo handling service , i.e we store at bonded ware house chemical , we provide heating on chemical while storage for the chemical , we provide security also., we have taken insurance for product also.

Had there will be any change from GST applicablity if we are providing cargo handling services at our Tank farm all risk and responsiblity for proper storage of chemical lies with us.

Regards

Surendra

[Alkesh Jani]

Sir,

In continuation to your query, the services rendered by you falls within the ambit of “Storage and warehousing” services and not under “Cargo handling” services. The cargo handling is with respect to for all modes of transport, including stevedoring services (i.e. loading, unloading and discharging of vessels' non-containerized freight, at ports). (Please refer explanatory notes for services)

Moreover, the incidental services mentioned by you such as, heating of chemicals, security service, insurance, may be considered as composite service for providing ware housing services.

Thanks,

[KASTURI SETHI]

Sh.Alkesh Jani Ji, I agree with your views regarding Cargo Handling Services and I am also thankful to you for cementing my reply with legal force.

[CASusheel Gupta]

Dear experts

Querist has stated one fact that they have entered in to rental agreement with the client.

CA Susheel Gupta

9811004443

AI Summary

Place of supply for warehousing services in India triggers CGST and SGST even if goods are re exported. Storage services provided by a bonded warehouse to a foreign owner for goods held in India are taxable as warehousing/rental of immovable property; the place of supply is in India so CGST and SGST apply rather than IGST, and incidental services may be treated as part of a composite warehousing service. Re-export of the goods is distinct and does not alter taxability of the storage service.