TaxTMI 
TaxTMI 
2018 (7) TMI 53
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....elated party situated abroad based on purchase order received from its customers. While the goods are in transit, the goods will be sold by the Applicant to its customers before the goods are entered for customs clearance in India. Whether IGST will be leviable on such sale effected by the Applicant to customers who are known to them at the time of placing order on the overseas party? 2. Whether input tax credit will have to be reversed, to the extent of inputs, input services and common input services used by the Applicant, in case the above transaction is not subjected to the levy of IGST by treating the same as an exempt supply for the purpose of Section 17 of the CGST Act? At the outset, we would like to make it clear that the provisons of both the CGST Act and the MGST Act are the same except for certain provisons. Therefore, unless a mention is specifically made to such dissimilar provisons, a reference to the CGST Act would also mean a reference to the same provison under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provison under the CGST Act / MGST Act would be mentioned as being under the ....
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.... be filed in the name of the end customer (final buyer) by the shipping line. i) Thereafter, the Bill of Entry will be tiled by the end customer who will discharge the applicable duties of customs and IGST on the imported goods and will clear the goods for home consumption/warehousing, as the case maybe. A complete set of the draft documents which will be involved in the transaction is being annexure herewith as Exhibit - A (Only for the purpose or illustration and better understanding) 5. In trade parlance, the transaction as proposed above, is commonly referred to as a 'High sea sale transaction' 6. The proposed transaction consists of (a) sale of goods by the oversea related party to the Applicant (First sale); and (b) sale of the same goods by the Applicant to its customers for whom the goods were bought by the Applicant its related party Second sale). The customers of the Applicant will be known to them at the time of placing order on the foreign supplier itself. 7. In terms of the proviso to Section 5(1) of the Integrated Goods and Services Tax Act, 2017 ('IGST Act') on imported Goods IGST Would be levied at the point when duty of Cu....
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....uired to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term." ...Emphasis Supplied Thus, as per the said section, advance ruling may be sought by the Applicant on the questions concerning determination of the liability to pay tax on goods or services or both and on the eligibility to avail input tax credit. The Applicant submits that the questions for determination in the instant advance ruling application concern (a) admissibility of Input tax credit of tax paid', and (b) determination of the liability to pay tax on the goods A. 4 Therefore, the Applicant in the instant case is eligible to file the present advance ruling application before the Maharashtra Authority for Advance Ruling, Mumbai, appointed vide Notification No. MGST 1017/CR 193/Taxation dated 24.10.2017 read with Section 99 of Maharashtra Goods and Service Tax Act, 2017. C. APPLICANT'S INTERPRETATION THE SALE OF GOODS MADE BY THE APPLICANT TO THE END CUSTOMER BEFORE THE GOODS CROSSING THE CUSTOMS FRONTIER OF INDIA ON THE B....
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....r Section 3(7) of the Customs Tariff Act. C.5 In the instant scenario, the imported goods will be sold by the Applicant to its end-customer before the goods are entered for customs clearance. This leg of the transaction will also qualify as an inter-state supply in terms of Section 7 of the IGST Act. Therefore, the essential question is whether this sale of goods happening before the goods are entered for customs clearance will be subject to a levy of IGST in terms of the provisons of the IGST Act. C.6 It is submitted by the Applicant that from a combined reading of Section 5(1) and the proviso to Section 5(1) of the IGST Act, it is evident that IGST on imported goods will be leviable only at the time of importation and at the point when duty of customs under Customs Act is leviable. Therefore, it is submitted that levying IGST once again on sale transactions which have happened prior to the importation of the same goods, does not arise. C. 7 This view of the Applicant has also been fortified vide the Circular No. 33/2017- Cus dated 1.08.2017 issued by the Central Board of Excise & Customs, New Delhi. The said circular has also been reproduced under: "1.....
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....ink between the first contracted price of the goods and the last transaction. In case of a doubt regarding the truth or accuracy of the declared value, the department may reject the declared transaction value and determination the price of the imported goods as provided in the Customs Valuation rules. 6. Field formations are requested to decide the cases of high sea sales of imported goods accordingly. Difficulties, in the implementation of this circular may be brought to the knowledge of the Board. ....Emphasis Supplied C.8 Thus, the above circular also affirms the view that high sea sale of goods in the course of import into India will not qualify as a supply subject to a levy of IGST Only at the time of importation, at the point where the goods are entered for customs clearance will IGST be levied. Therefore, the question of levying IGST on high sea sale of goods before they are entered for customs clearance does not arise, In other words, IGST will be leviable only at the point of importation of goods into India and therefore only once. C.9 In view of the above, it is submitted that no IGST will be leviable on the sale of goods made by the Applicant to its end custom....
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....ant to the end customer, IGST is being discharged by the customer at the time of importation of the goods into India. Therefore, the said transaction is not falling within the scope of exempt supply as contemplated under Section 2(47) of the CGST Act. D.7 Since the said supply is not an exempt supply, it is submitted that input tax credit in respect of the inputs, input services and common input services used in connection with the proposed transaction is not required to be reversed. Applicants understanding E.1 As explained in the above para C, the proposed transaction of sale which will be undertaken by the Applicant will qualify as a high sea sale and will not be subject to levy of IGST. IGST will be leviable on the said goods only at the point of import into India. E.2 As explained in the above para D, the said supply will not qualify as an exempt supply falling within the purview of the provisons of the IGST Act/CGST Act and thus, ITC reversal will not be required under the provisons of the same." 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- "Question - 1 As Per Proviso to Secti....
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....mon input services used by the Applicant." 04. HEARING The case was taken up for preliminary hearing on dt.27.03.2018 with respect to admission or rejection of the application when Sh. R. Nambirajan (Advocate) alongwith Sh. Asish Philip Abraham (Advocate) and Sh. Satish Dhawan, Dy. General Manager appeared and requested for admission of application as per their contentions made in the application. The application was admitted and called for final hearing on dt.17.04.2018 when all the aforementioned persons and Sh. Nirav Karia (Advocate) appeared and made written submissions and orally contended as per their written submission. The Jurisdictional Officer, Sh. Rahul Walse, Dy. Commr. of State Taxes (E-619), Large Tax Payers Unit -Il, Mumbai was present on both the occasions and has made written submissions in the matter. 05. OBSERVATIONS We have gone through the facts of the case. The issue put before us is thus - * The applicant will be buying products from an overseas supplier who will be the applicant 'srelated party, The said transactions will be at arm 's length pricing. * The applicant will be buying the Products from such overseas party against purchase ordersr....
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....act, that current shipment is on Ex-works terms, the seller shall be responsible for the payment of insurance with respect to this High Sea Sales. b) Insurance Considering the fact. that current shipment is on Ex-works terms, the seller shall be responsible for the payment of freight other related expenses with respect to this high sea sales. 5. Customs Clearance In view of disposal of goods on high sea sales basis and transfer of title by the seller in favour of the buyer, the buyer shall arrange clearance of goods from Customs at its sole risk and responsibilities. The buyer shall be responsible for payment of the customs duties, clearing of goods, port expenses, demurrage container charges, octroi, inland transportation and any other related expenses. 6. Post Procedure The Buyer shall hand over to the seller the Original exchange control copy of the Bill of Entry, copy of Customs attested invoice and other documentary proof of having cleared the material from the Customs as are required by the Seller to the Bank and or RBI or any other State or Central Govt. Agency, 7. Sales Tax As the goods are being sold on high sea sales. no central sales tax will be charged under th....
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....HAPTER IV DETERMINATION OF NATURE OF SUPPLY Inter-State supply 7. (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in-- (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, shall be treated as a supply of goods in the course of inter-State trade or commerce. (2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce. Intra-State supply. 8. (1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply: Provided that the following supply of goods shall not be treated as intra-State supply, namely:-- (i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit; (ii) goods imported into the territory of India till they cross the customs frontiers of India; or (iii) supplies made to a tourist referred to in section 15. We find that Sect....
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....supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not hav....
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....ct is as under:- As per Section 2(47) of the Central Goods and Services Tax (CGST) Act, 2017, "exempt supply" means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply" Further we find that Section 278 of the CGST Act defines non-taxable supply which is as under:- "As per Section 2(78) of the Central Goods and Services Tax (CGST) Act, 2017, "non-taxable supply" means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act" Thus it is very clear that the goods which are sold on high seas sale basis are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975. We find that the above legal position is further reiterated and confirmed by Circular No. 3/1/2018 - IGST dated 25.05.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing. Question 2 Whether input tax cred....