Purchase from Country A and supply it to Country B without bringing it to India

[TN Rajendran]

Dear Experts,

I'm buying a material from one country, say Germany. I want to sell it to my customer in another country, say Dubai.

Normally, customs should be paid if I import it to India from Germany and then export it to Dubai from India. Since the customs duty that I'm paying during the import getting added to my cost I'm not able to supply it to at a competitive price to my customer is Dubai.

Suppose, if I directly supply the materials from Germany to Dubai (i.e., without bringing it to India) can I avoid Customs duty? What would be its Pros and Cons?

Thank You.

[KASTURI SETHI]

SCHEDULE III (CGST ACT, 2017)

[See Section 7] of CGST ACT, 2017

ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES

[7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

A foreign country is a non-taxable territory. The jurisdiction of GST laws are for India.

Customs duty.

Section 12 of the Customs Act, 1962 provides that customs duties which includes integrated tax in respect of imported goods would be levied only at the time of import or export of goods.

You are neither involved in import into India nor export out of India.

[YAGAY andSUN]

Since Goods have not entered into Indian territory, therefore, Customs Duty is not liable to be imposed. You would have to route the documents through your Authorized Dealer i.e. through your Banker.

AI Summary

Customs duty not leviable where goods move between foreign territories without entering national territory, subject to documentary routing. Goods sold from one foreign country to another without entering India are outside Indian GST and customs levy; customs duties are imposed only at import/export into India and thus do not arise if goods do not enter Indian territory. To operationalise this, the supplier must ensure physical non entry into India and maintain documentary evidence, routing transactions through an authorized dealer or banker to regularise payment and support the non levy position.