GST on sale of goods lying in customs warehouse, before payment of customs duty

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Dear Experts

Please guide. X imports goods in India and files Bill of Entry for Home Consumption; the goods are lying in Customs Warehouse pending payment of duty. Before payment of duty, X sells goods to Y; however after the sales X pays the Customs Duty and gets OOC. Now the questions are:

1. Whether sales from X to Y will be liable to GST?

2. Is there any legal prohibition under Customs Act or GST Act on sale of goods imported pending clearance?

3. If the import is completed only after payment of duty, then this sales from X to Y would be domestic sales or high sea sale?

AI Summary

Warehoused goods sales before home-consumption clearance may fall outside GST, while post-clearance sales constitute taxable domestic supplies.
A sale of imported goods from X to Y while the goods remain in a customs warehouse and before clearance for home consumption is considered under paragraph 8(a) of Schedule III of the CGST Act. The stated view is that such a pre-clearance supply of warehoused goods is neither a supply of goods nor services and is outside GST. Clearance follows payment of customs duty and grant of an Out of Charge order; a sale after that stage is a domestic taxable supply. The discussion distinguishes the transaction from a high-sea sale.