High Sea Sales from the point of view of an entity incorporated in India refers to the sale of goods which is made after the goods cross the Custom Barriers of the Foreign Nation but before crossing (entering) the Custom frontiers of India by way of transfer of document of title.
As per Section- 2(79) of CGST Act, 2017– Non- taxable territory means the territory which is outside the taxable territory. A taxable territory means the territory to which the provision of GST Law applies. Accordingly, in CGST law, the taxable territory would cover all locations covered under the extent of law. i.e. whole of India.
In this regard, it would be relevant to understand the geographical extent covered within the meaning of the term “India”.
Supply taking place in a “non- taxable territory” would be outside the jurisdiction for imposing any GST. High Sea Sales (first supply) are not liable to GST.
As per Section- 7(2) of IGST Act, 2017 supply of goods imported into territory of India, till they cross custom frontiers of India, shall be treated a supply of goods in the course of inter-state trade or commerce.
Custom frontiers of India includes:-
a) Custom Port
b) Custom Airport
c) International Courier Terminal
d) Foreign Post Office
e) Land Custom Stations
f) Area in which imported goods meant for export are ordinarily kept before clearance by Custom Authorities.
g) Bonded Warehouse
Where a transfer of documents of title takes place during import, the question of payment of tax by the importer would not arise since the documents of title would be transferred before the goods cross the custom frontiers of India.
It has been clarified vide Circular No- 33/2017- Customs dated 1st August 2017, that IGST on High Sea Sales transaction on imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Custom authorities for the custom clearance purposes for the first time.
In case of high sea sales there can be 2 kinds of transaction-
For example- A company in Germany supplies goods from Germany to another company in Sri Lanka — this is not a supply in the course of inter-state trade or commerce because it commences and concludes outside the territory of India. It would be so, even if the goods were supplied by the company in Germany from Germany to a customer incorporated in India if the goods are not ‘brought’ into India but sold in high seas to yet another company in Singapore.
In order for every supply to come within the operation of Section 7(2) of IGST Act it requires that the resultant effect of the supply must cause the goods to enter the territory of India.
This Act does not enjoy extra- territorial jurisdiction and is limited to imposing tax if the goods are imported into the territory of India.
The same is supported by Authority of Advance Rulings Kerala Order No- CT/2275/18-3 dated March 26, 2018.
For example:- Goods have been imported from France by a company incorporated and registered in Nasik which have landed at Mumbai port but during their clearance are supplied by the Nasik company to a company in Pune, this supply continues to be in the course of inter-state trade or commerce. Even though the supplier is in Nasik and the recipient is in Pune, since the goods have not yet crossed the customs frontiers of India at the time of supply. This supply comes within the operation of Section 7(2) of IGST.
Transactions taking place before filing of bill of entry are termed as “high sea sale” transactions under common trade practice where the original importer sells the goods to a third person before the goods are entered for customs clearance. This supply is covered within definition of inter-state supply. Provisions of Section 3(12) of Customs Tariff Act, 1975 in as much as in respect of imported goods provides that all duties, taxes, cess’ etc. shall be collected at the time of importation i.e. when the import declarations are filed before the customs authorities for the customs clearance purposes.
High sea sale transactions, though regarded as supply in the course of inter-state trade or commerce, are not subject to levy of IGST as the supply takes place before filing of Bill of entry and IGST in case of importation of goods can be levied at the time of filing of Bill of Entry.
Hence, IGST on high sea sale(s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation.
Conclusion- Goods are liable to IGST when they are imported into India and the IGST is payable at the time of importation of goods into India.
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