A company dealing in software does development of software and got the order from Thailand for development of software and along with Hardware . a company did development of software and exported to Thailand. But hardware were brought form Hongkong and it has not crossed the territory  of India and directly supplied to Thailand on bill to ship to basis. It was bill to India and Ship to Thailand directly. Company applied for  advance ruling and raised question regarding the question :

i) Whether GST is payable on goods procured from Hongkong located outside India in a context where the goods so purchased are not brought into India?

ii) Whether GST is payable on goods sold to customer located outside India, where goods are shipped directly from the Hongkong’s premises (located outside India) to the  Customer’s premises in Thailand ?

Fact of case :

1. As per Section 2(10) of the Integrated Goods and Services Tax Act, 2017, “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India.

2. Accordingly to section 2 (7) of Integrate Goods and service tax act, 2017 ,supply of goods imported to be territory of india , till it reaches the custom frontier of india, shall be supply of goods in the course of inter state trade or commerce .

3. Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975, on the value determined 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

4. Upon the conjoint reading of provision of IGST Act , Customs Tariff Act, it is found that integrated tax on goods will be charged when duties of customs are levied on goods as per section 12 of Customs Act ,1962.

5. Vide circular no 33/2017 dated 1.8.2017 it has been clarified in  sub section 12 of section 3 of custom tariff act,1975 that all the duties, taxes and cesses will be imposed at the time of importation i.e when the import declaration are filed  before the custom authorities for custom clearance.

6. We find that integrated  tax could not be levied where bill of  entry has not been filed.

7. Same way for levying of GST on outward supply from place of vendor to customer, it is to mention that the thumb-rule for determining the taxability of any transaction is to ascertain whether the transaction tantamount to ‘supply’ in terms of the provisions of The term ‘supply’ has been defined at Sec. 7 of the CGST Act, 2017 which reads as under:

1. For the purposes of this Act, the expression “supply” includes —

i. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

ii. import of services for a consideration whether or not in the course or furtherance of business; [and]

iii. the activities specified in Schedule I, made or agreed to be made without a consideration;

8. In the instant case supplier is located in India and place of supply is outside India. Such supply shall be treated as inter state supplies. The place of supply in the instant case would be governed by the provisions of 10 of the IGST Act, 2017 of which the relevant text reads as under

9. In the instant case, it is an undisputed fact that the supply involves movement of goods and therefore the place of supply would be the termination for delivery to the The goods under consideration are supplied to overseas buyers as declared by the applicant and as such the place of supply will be a place outside India. Further, the supplier is the applicant who has declared the principal place of business within India and issues the invoices for sale of such goods.

10. Export of goods has been defined in section 2[5] of IGST Act, 2017 which reads as under ;

Export of goods would mean—‘With its grammatical variations and cognate expressions, means taking goods out of India to a place outside India’.

The above definition indicates that the act of taking goods out of India to a  place outside India qualifies as export. In the instant case, the goods have not crossed the Indian customs frontier and as such it is clear that the goods are not physically available in the Indian territory. When the goods are not available in the Indian territory, the question of taking goods out of India does not arise. Thus, the subject transaction does not qualify as export of goods.

Similar AAR being decided in Sterlite Technologies Ltd in Guajrat

Conclusion :

1. GST is not payable on goods procured from vendors outside India , where the goods so purchased are not brought down in to India.

2. Applicable GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendors premises[ located outside India] to the customers premises.

Disclaimer :  The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for  any loss or damage of any kind  arising out of this information set out in the article and any action taken based thereon.

About the Author:

Author is  Sr. Partner of   GRAND MARK & ASSOCIATES , Chartered Accountants in  Gurugram [ Haryana]  and Domain Head of  GST Department of GMA  . He can be reached at  sanjeev.singhal@grandmarkca.com.  WWW. grandmarkca.com

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2 Comments

  1. ND Vora says:

    Sir,

    If the supplier is liable to Pay GST on the good supplied to a customer located outside india, In which row is the said transaction to be reported in GSTR-1 and GSTR-3B respectively?

    And one more Question : Is the said amount paid available for refund, like in the case of Export with payment of duty?

    Please reply if possible.

  2. FAISAL says:

    isnt it clear from the seventh point of Schedule III to CGST Act 2017: Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of Services (See Section 7) read as “Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India” that it doesnt amount to supply?

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