TaxTMI 
TaxTMI 
2019 (1) TMI 1933
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.... The applicant company has submitted that: I. That for the manufacture of the said forgings, the Applicant manufactures capital goods namely tools, dies and moulds, generally known as 'the tooling kit' based on the drawing and design specifications given by each customer. The charges incurred for the manufacture of this tooling kit is borne by the customers within India and outside India. II. That for reimbursement of the charges from the customers, the Applicant raises an invoice on the customers and recovers the agreed amount. In case of foreign customers, such charges are recovered in convertible foreign exchange. Ill. That after the tooling kit is manufactured; it is exclusively used by the Applicant within their factory for manufacturing sample forges as order by the respective customer. The samples manufactured are sent to the customer for approval. Once the forge is approved by the customer, the tooling kit is further used in the manufacture of the forgings by the Applicant. IV. That in most of the cases the tooling kit is the property of the customer and the customer has the right to remove the tooling kit from the Applicant's factory for any reason whatsoever.....
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....' has been defined in Section 7 of Central Goods & Service Tax Act, 2017 (hereinafter referred to as 'CGST Act'). The term includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course of or in furtherance of business. The extract of Section 7 is reproduced herein below :- "7.(1) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sole, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.' (ii) On a careful perusal of the arrangement entered into between the Applicant and their customers, it may be said that ....
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....ory is situated, i.e. Jamshedpur. Further, the place of supply of goods other than goods imported into or exported out of India is determined by Section 10 of Integrated Goods & Service Tax Act, 2017. The relevant extract is reproduced herein below- "10 Place of supply of goods other than supply of goods imported into, or exported from India.(1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,- (a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient." [Emphasis supplied] (iv) It is reiterated that the intention of the agreement is to supply forgings and the manufacture of tooling kit is only incidental to the ultimate supply. Hence, the place of supply for every payment recovered from the customer shall be determined in accordance with the place of supply of the forgings. It must be noted that since in the instant case, the supply of forgings involves the movement of forgings from....
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.... to foreign customers with the incidental value of tooling shall be zero rated. (iii) It must be noted that the amount received after manufacture of tooling kit is a payment in the course of supply of forgings. The amount so recovered is actually an incidental expense recovered from the customers for supply of forgings. As per Section 15(2) (b), such incidental expense recovered is includible in the value of the main supply of forging. Thus, the said amount may be said to be consideration for the ultimate supply of forgings. (iv) It may thus be concluded that since the payment recovered from the customers after manufacture of tooling kit is an incidental expense relating to export of forgings, the same is also zero rated and consequently no tax is to be paid on such amount received by the Applicant. 6. Personal Hearing Proceedings: The Personal hearing of the applicant's Representatives as well as the concerned Jurisdictional Officer was conducted and concluded on 07-01-2019. 7. Findings & Discussions: We have considered the submissions made by the Applicant in their application for Advance Ruling as well as the submissions made by the company re....
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....T Act, which defines the value of supply stipulates that the value of supply shall include "(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;" Hence, the supply in the instant case is that of forgings only. There is no question of holding that the manufacture of tooling kit is a standalone supply to the customers chargeable to GST. On going through the application and other documents submitted by the applicant as well as the view of the applicant, it is observed that the applicant is engaged in manufacture of forgings. For manufacture of forgings the applicant manufacture capital goods namely tools, dies and mould, generally known as the tooling kit based on the drawing and design specifications given by each customer and the charges incurred for the manufacture of this tool kit is borne by the customer. This agreed charge has been recovered from their customer by raising separate invoice which is reflected in the copy of invoice, ....
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....sideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, mode or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule Il ......." Schedule II of the Act specifies various transactions which are to be treated as supply of goods or services. Paragraph 1 inter alia specifies following three transactions: (a) Any transfer of the title in goods is a supply of goods. (b) Any transfer of goods or of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services. (c) Any transfer of title in goods under agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed, is a supply of goods. The legal provisions as stated above, it is clear that the liabilities of tax arise on the date of issue of invoice by the supplier with respect to the supply. In the instant case, the applicant has issued separate invoice to their custo....
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...., it shall be treated as an inter-state supply of goods including the tooling kit and thus IGST shall be levied on the invoice issued for milestone payment after the manufacture of tooling kit. Similarly, if the customer situated inside Jamshedpur, it shall be treated as an intra-state supply of forgings, and thus CGST and SGST shall be levied on the invoice issued for milestone payment after the manufacture of tooling kit. During the discussion of the first question of the applicant it is clearly established that the separate invoice issued to their customers to recover the agreed amount for manufacture of tooling kit, which is treated as a supply of the goods and accordingly liable for CGST and SGST or IGST. Further, the applicant have mentioned that whether the forgings are supplied by them to customers situated outside Jamshedpur, it shall be treated as an inter-state supply of goods and thus IGST shall be levied on the invoice issued for milestone payment. Similarly, if the customer situated inside Jamshedpur, it shall be treated as an intra-state supply of forgings, and thus CGST and SGST shall be levied on the invoice issued for milestone payment. While it is clearly ment....
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.... making zero-rated supplies, notwithstanding that such supply may be an exempt supply. ..........." In this regard it is already established supra that the separate invoice issued to their customers to recover the agreed amount for manufacture of tooling kit, which is treated as a supply of the goods and accordingly liable for CGST and SGST or IGST. Export of goods as defined under Section 2(5) of the IGST, Act i.e. "export of goods" with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;" means taking goods out of India to a place outside India. In the instant case it is undisputed fact that the applicant will supply only export the components i.e. forgings, which will be manufactured from the tooling kit. Hence, the tooling kit in respect of which charges are received will never be sent outside India. It is also well settled that to export means the goods must be loaded and shipped outside the territorial water of India (B K Wadeyar vs Daulatram Rameshwar Ial AIR 1961 SC 311). As discussed above, it is clearly established that the amount recovered from foreign customers after the manufacture of toolin....