TaxTMI 
TaxTMI 
2018 (7) TMI 53
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....purchasing the goods from its overseas related 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 / MGS....
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....elated party. h) The Import General Manifest ('IGM') will 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, 2....
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....; (e) determination of the liability to pay tax on any goods or services or both; (f) whether applicant is required 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....
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...., IGST will be levied at the point of levy of duty of customs in accordance with the provisons of the Customs Act, 1962 and the IGST will be levied under 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 N....
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.... required to furnish the entire chain of documents, such as original Invoice, high-seas-sales-contract, details of service charges/commission paid etc, to establish a link 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 in....
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....e supply ' meansa supply of goods or services or both which is nor leviable to tax under this Act or under the IGST Act. ' D.6 In the instant case, on the supply of goods from the Applicant 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....
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....saction is not subjected to the levy of [GST then the same will be treated as an exempt supply for the purpose of Section 17 of the CGST Act and input tax credit will have to be reversed, to the extent of inputs, Input services and common 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 ap....
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....ales. Details 2. Payment The buyer agrees to make payment for the goods by the seller on High Sea through advance cheque. 3. Delivery The seller will transfer the rights Title of the goods to the buyer by endorsing the Bill of Lading in favour the buyer after realization of the cheque. 4. Freight & Insurance a) Freight Considering the fact, 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 sell....
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....submissions Of the applicant and the draft High Sea sales agreement by them it is clear that the applicant would be importing the goods and would be selling the goods on high seas sale basis to another buyer. In view of this we would be required to refer to the provisons of IGST Act, 2017. First of all to confirm the nature of supply of present goods i.e. whether inter-state or intra-state we are required to refer to Chapter IV of the IGST ACT, 2017, which reads as under:- CHAPTER 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 ....
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....etermined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962. (52 of 1962.) (2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of 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 t....
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....in case of goods sold on high seas sale basis there is no levy till the time of their customs clearance in compliance with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act. In view of this the import goods sold on high seas sale basis, though they are clearly in the nature of inter-state supply would come in the category of "exempt supply" as no duty is leviable on them except in accordance with proviso to Section 5(1) of the IGST Act. We find that in the definition of exempt supply as given in Section 2(47) of the CGST Act 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 In....