BILL TO SHIP TO OVERSEAS

[Anurag Jain]

Sir,

One of my client started business in which he receives purchase order of goods from one country (X) and then he makes purchase order of same goods to another country (Y) and goods will be shipped from country Y to country X directly. Country Y dealer makes bill on my client for purchase and my client drawn bill on country X dealer for sale, what is the impact of GST on this transaction as it is overseas transaction?

[KASTURI SETHI]

My views as are as under:-

It is an issue of determination of place of supply for goods under Section 10 of IGST Act.

Suppose your client (manufacturer) is 'A' in India and he has received purchase order of goods from 'B' located in a foreign country named , 'X'. and A gave that purchase order of same goods to C located in another country named, 'Y'. On the directions of A , C delivered the goods to B. C raised invoice to A and, in turn, A raised invoice on B.

In this transaction, the goods have not entered into India and hence no question of export. Hence movement of goods from C located in Y to B located in X cannot be called as supply of goods from India. Such activity is neither import of goods nor export of goods. This activity/transaction does not qualify to the parameters laid down in Sections 2(5) and 2(10) of IGST Act for export and import which are extracted as under .

(5) “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;

(10) “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India;

In view of the above definitions, it can be inferred that these goods have neither been imported into Indianor exported from India. Hence it is an activity from one foreign country (non-taxable territory) to an other foreign country (non-taxable territory). See Schedule-III Serial No. 7 of CGST Act. titled as neither a supply of goods nor 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". (inserted vide Section 32 of CGST (Amendment) Act, 2018 (31 of 2018) w.e.f. 1.2.19.

The jurisdiction of both Acts i.e. CGST Act and IGST Act extend to India only. So GST cannot be levied on the above transaction. Peruse Section 10 (1) (b) & (c). of IGST Act for taking decision on determination of place of supply..

[YAGAY andSUN]

In addition to above reply though GST provisions are not applicable due to jurisdictional issues, however in our FEMA provisions are very much applicable on these transactions.

AI Summary

Place of supply: cross-border movements not entering domestic territory fall outside GST jurisdiction but may trigger foreign exchange rules. When an Indian intermediary directs a foreign supplier to deliver goods from one foreign country to a buyer in another foreign country and the goods do not enter India, the transaction is neither export nor import under statutory definitions, falls within the Schedule III exclusion for movements between non-taxable territories without entering India, and is outside GST jurisdiction; FEMA provisions may still apply.