Applicability of GST on auction by the custodians

[Vel Murugan]

Dear Sir,

Could you please throw some light on the following. In some cases, a person actually imports the goods but has not come forward to clear the goods from Customs due to many reasons. Hence, the goods are lying in the customs bonded premises. As per Sec 48 of the Customs Act,1962, the custodian (usually the cfs) sell the goods under auction, after getting approval from the Customs dept. Consideration received through bidding is cum-duty price for the purpose of Customs Act. Hence, BCD, IGST and other customs component are deducted and remaining amount is retained by the custodian.

Usually this amount is considered as the price in lieu of their service by way of storage/ other services. In pre-GST era, it is clear that since recipient does not exist (actual importer is not known) activities of providing storage service can not be qualified as a service [any activity provided by a person, for ANOTHER, for consideration].

However, in GST, taxable event is supply and definition of supply is broad as per Sec.7 which is inclusive definition and starts with all forms of supply of goods and services or both. This being the scope of supply, whether amount retained by the custodian attracts GST liability?

[Alkesh Jani]

Shri

With regards to your query, my views is, when goods are sold by auction, the title of goods are transfer to the buyer of the goods. The buyer is liable to pay customs duty as applicable. The remaining amount are consideration for supply of storage/ warehouse service and is liable to GST.

Thanks

[KASTURI SETHI]

I agree with the views of Sh.Alkesh Jani Ji.

[CA Hemanth Kumar]

In case if the amount is in the nature of deposit, GST will be applicable only when such deposit is adjusted for the storage services etc.

AI Summary

GST on retained auction proceeds: custodian's retained amount treated as consideration for storage services and subject to tax. Goods left uncleared in customs bonded premises are auctioned by custodians; auction consideration is treated as cum-duty price with customs components deducted and the custodian retaining the balance. The retained balance is questioned as to whether it is consideration for a taxable supply under GST. Forum replies state the retained amount is consideration for storage/warehouse services and liable to GST, while noting amounts characterised as deposits attract GST only upon adjustment for services.