Sales tax applicability on export

[Asked by Guest]

We would be selling our products to a company that is based in the USA and receiving the payment in foreign exchange. However, our buyer has instructed us to dispatch the materials to a warehouse in SEZ. The export invoice /packing list etc. have the name of the buyer as our customer in the USA but the consignee is the warehouse in SEZ a/c buyer name. ARE1 and Bill of Export is also being filed. Our buyer states that no sales tax is payable as this is export transaction. Buyer can not issue Form I as he is not an Indian company & the warehouse in SEZ cannot issue Form I as they are only providing warehousing service and not consuming the materials. Please advice whether we have to charge sales tax or not ?

[Surender Gupta]

It may not be possible to discuss all the provision here since this query is complicated one, but I believe that the transaction qualifies the conditions of section 5 of the CST Act, and there is no local tax is applicable.

Hi,

We are an e-commerce company, receiving orders online and shipping goods by courier out of India. We do not claim any duty drawback or any other export benefits.

We have been given a sales tax demand for our sales, as the sales tax asst. commissioner refuses to accept courier airwaybill as proof of goods leaving the country. He wants us to pay sales tax on our entire exports since 2006 along with penalties. 

Can anyone guide on how we can get out of this mess? If the order is passed, it would affect every e-commerce company who sends goods overseas by courier.

Thanks.

AI Summary

Interstate export classification may exempt local sales tax when goods are consigned to a SEZ warehouse.
Whether sales tax applies when goods sold to a foreign buyer are paid in foreign exchange but consigned to a SEZ warehouse hinges on treating the supply as an interstate/export transaction and on export documentation. One reply concluded the facts satisfy section 5 of the CST Act so local sales tax is not applicable. A related concern notes assessing officers may refuse courier airwaybills as proof of export, creating assessment and penalty risk for e commerce exporters.