GST on cross border Transactions such as- Export |Ex-Bond |High seas sale |merchant trade| bill to ship to
As Economy and trade have grown to a great extent, there are many types of cross border dealings & transactions that we come across. In this article I have tried to compile a few examples of cross border transactions and their taxability under GST Regime.
| Sr No | Transaction | Description | Taxability |
| 1 | A Ltd India company supplies to its establishment in USA | Supply of service to distinct person outside India | This is not an export, it’s a taxable interstate transaction.
However same is exempt by virtue of NN 15/2018 IGST(R), provided place of supply of service is outside India in accordance with Sec 13 of IGST Act. |
| 2 | M Ltd, only manufactures Salt (which is exempt from GST) and sells them domestically as well as exports it. | Export of goods exempt in India. | As per section 16(2) of IGST Act, this supply will be treated as export (zero rated supply) even though it is exempt in India.
Hence Credit/ refund of ITC can be taken |
| 2 | A Ltd, Maharashtra, importing oil from Singapore.
These goods are warehoused under customs Later, A Ltd finds a buyer in Tamil Nadu & Sells the goods. |
Ex- Bond | From 1st Feb 2019-Transaction in Sch III- neither supply of goods nor supply of services (Non-GST Supply)
ITC is not required to be reversed- Explanation to Sec 17(2) & Sec 17(3) |
| 3 | C Ltd, Chennai placed an order with a supplier in USA to supply steel.
Before the goods reached the Indian customs, it was sold to D, Mumbai by way of transfer of document of title to goods. |
High Seas Sale | From 1st Feb 2019-Transaction in Sch III- neither supply of goods nor supply of services (Non-GST Supply)
ITC is not required to be reversed- Explanation to Sec 17(2) & Sec 17(3) |
| 4 | A ltd, Pune has a customer in Dubai XYZ Ltd and a supplier in Thailand B Ltd
A ltd place an order on B Ltd to directly supply goods to XYZ Ltd. |
Merchant Trade Transaction | This is neither import nor export since goods are not entering India.
From 1st Feb 2019-Transaction in Sch III- neither supply of goods nor supply of services (Non-GST Supply) ITC is not required to be reversed- Explanation to Sec 17(2) & Sec 17(3) |
| 5 | X Ltd in India receives order from PQR ltd USA for component supply
X Ltd develops a mould, Invoices i to PQR Ltd and retains it in factory for manufacture. |
Tools/Moulds | In export the basic requirement is that the goods must leave India. In this case goods are lying in India even though legally it belongs to PQR Ltd USA.
Hence this transaction is Taxable. |
| 6 | E1 ltd in Delhi places an order with E2 in Pune to supply goods to ABC Ltd in Dubai | Bill to in India & Ship to outside India (Merchant Exporter) | Supply by E2 to E1-Domestic Transaction
GST to be charged @1%- NN-41/2017-IGST(R)– if conditions are fulfilled Supply by E2 to ABC Ltd (Dubai)- Export of goods ITC eligible |
| 7 | D1 Ltd in India receives order from D2 Ltd (USA) to deliver goods to XYZ Ltd, Mumbai | Bill to outside India and ship to in India | Supply by D1 Ltd to D2 Ltd- Taxable Supply, IGST to be charged. This is not an export since goods are not physically leaving India. |
| 8 | A ltd India is sourcing goods for B Inc, in India
As a part of their arrangement 5% value of goods sourced by A Ltd shall be paid |
Intermediary Service sourcing in India | As per Section 13(8)- POS in case of intermediary is place where the intermediary is located.
Hence, this will be a taxable supply. |
| 9 | A ltd India is sourcing goods for B Inc, outside India
As a part of their arrangement 5% value of goods sourced by A Ltd shall be paid |
Intermediary Service sourcing outside India | Till September 2019, this was taxable. Amendment was made to NN 9/2017- IGST(R) through NN 20/2019 by inserting entry no 12AA.
Thus, from 1st October 2019 this transaction is exempt. |
| 10 | Goods sold to tourists by duty free shops | Duty free shop supplies are not Export under GST as per Delhi AAR ruling. |
Author Bio
can you please elaborate/provide more legal background for point no 4,5 and 7
In High Sales Transaction Time of Supply ia at the time of clearance of goods for home consumption, hence importer on the basis of documents endorsed to recipient out of india. So goods didnt enter in india so No ITC has been taken by importer b”coz no goods crosses custom frontier of india. So recipient didn’t take ITC in GSTR 3B so there is no concept of ITC not to be reversed as per sec 17(2)