Request for Clarification on Export Order

[SURYAKANT MITHBAVKAR]

Please clarify the following points.

1. The Order placed by Singapore Company to Indian manufacturer to manufacture Pharmaceutical Machinery and payment is made in USD.

2. The machine against the above order will be supplied in India to an Associate unit of Singapore Company to manufacturing pharmaceutical formulation.

3. The Indian associate unit is neither SEZ nor EOU.

Query: Can we do such type of transaction? If yes, please let us know procedure to be followed by Singapore Company who is placing order and transferring fund to Indian Manufacturer who is manufacturing machinery and then supplying to Indian Associate Company of Singapore.

[Rajagopalan Ranganathan]

Sir,

You charge applicable CGST and SGST or IGST from the parent company in Singapore. Since machinery is supplied within taxable territory gst is payable. It is not export though the payment is made by the parent company in USD.

[Shilpi Jain]

If the Singapore associate has majorly exports it can consider taking an EPCG license so that no gst is paid on pur hase. If not consider invoicing to the Indian company so that it can use the credit.

The foreign company what it has to do depends on what is the transaction terms between the foreign co and the Indian associate.

AI Summary

GST on domestic supply: machinery delivered in India is taxable despite foreign payment; consider relief schemes or credit routing. Supply of machinery manufactured in India and delivered to an Indian associate constitutes a taxable domestic supply for GST purposes irrespective of payment in foreign currency; the Indian supplier must charge applicable CGST and SGST or IGST. Alternatives include using an authorised duty relief/export promotion mechanism to avoid upfront GST or invoicing the Indian associate so it can claim input tax credit, with final requirements dependent on the contractual allocation of responsibilities between the foreign principal and the Indian associate.