Case Law Details
In re Murata Electronics (India) Private Limited (GST AAR Tamilnadu)
In the case of In re Murata Electronics (India) Private Limited, Advance Ruling No. 18/ARA/2024, the Authority for Advance Ruling (AAR) in Tamil Nadu received a request from Murata Electronics to clarify whether the Integrated Goods and Services Tax (IGST) is applicable on the sale of goods warehoused in a Free Trade and Warehousing Zone (FTWZ) to customers in India, prior to their clearance for home consumption. Murata Electronics, a subsidiary of Murata Electronics Singapore, imports electronic components to sell in India. Upon importation, the goods are stored at an FTWZ facility operated by Timescan Logistics, where no manufacturing or processing occurs. The sales process involves raising invoices and having customers clear the goods by filing a bill of entry for home consumption after customs duty is paid.
The applicant contended that according to Section 7(2) of the IGST Act, the supply of imported goods is considered an interstate supply until they cross customs frontiers, with the applicable customs duties being levied at the time of clearance. Murata Electronics argued that the sale of goods from the FTWZ facility to customers before customs clearance falls under entry 8(a) of Schedule III of the CGST Act, which classifies such transactions as neither a supply of goods nor services. Consequently, they believed that IGST should not be levied on these transactions in addition to the customs duties already applicable. However, the applicant decided to withdraw their application for advance ruling on this matter, stating that the determination process for the questions raised was unnecessary. The AAR accepted their request to withdraw without providing a ruling on the merits of the case.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,TAMILNADU
M/s. Murata Electronics (India) Private Limited, Old No. 12, New No. 43/1, Prestige Palladium Bayan, 10th Floor, Greaxns Road, Chennai — 600 006. (hereinafter called as the Applicant’) is engaged in the wholesale business. They are registered under the GST Acts with GSTIN: 33AAGCM7896RTZE .
2 The Applicant submitted a copy of challan dated 19.07.2023 evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017.
3. They have preferred this application seeking Advance Ruling on the following:
(1) Whether IGST is payable on sale of goods warehoused in FTWZ premises to customers in India, in addition to customs duty payable i.e. BCD + IGST, where goods are sold before clearance for home consumption? In other words, the customs clearance for home consumption is done by the appellants customer?
4. Statement of facts in brief:
4.1. The applicant submits that Murata Electronics (India) Private Limited (here referred as WIEIPI2 or the applicant’), a subsidiary of Murata Electronics Singapore (Pte) Limited (`Murata Singapore’) was incorporated on 22 September 2010, with the object of performing services in relation to sales and marketing activities in India for the products of Murata Group. That Murata group operates its business across various countries.
4.2. The applicant submits that their target markets include audio-visual equipment, communications, computers, home appliances, automotive electronics, environment, energy and healthcare and they also pursue design activities for R&D Organizations and integrated circuit manufacturers as a part of local customer services, while offering products promptly to fulfil customer needs.
4.3. The applicant submits that they recently started importing goods (i.e., electronic components including modules, sensors and wireless communication products) from its group companies located in countries such as Japan, Singapore etc with an intention to resell the same to customers in India and in this regard, they have entered into FTWZ facility service agreement with Timescan Logistics India Private Limited (hereinafter referred to as `FTWZ Unit or Timescan’) and Kintetsu World Express India Private Limited (hereinafter referred to as `KWE’) for getting FTWZ services and clearing/handling services respectively. That Timescan is an FTWZ Unit under J Matadee FTWZ SEZ, Perumbakkam, Road, Mannur Village, Sriperumbudur Taluk, Kanchipuram, Tamil Nadu 602 105.
4.4. The applicant submitted that the goods imported are stored in the FTWZ Unit under the cover of bill of entry for warehousing. That in the warehousing facility, no manufacture or processing activities are done. That as and when the applicant receives orders from customers in India, they raise sale invoice and warehoused goods are cleared by the customers by filing bill of entry for home consumption on payment of appropriate customs duty.
4.5. The applicant submitted that the modus operandi for this proposed transaction i.e. import and sales, is as follows;
| a) | The Applicant purchases goods from its group companies outside India. On arrival, the goods are warehoused inside the FTWZ Unit on the behalf of the Applicant. The title to the goods stored in FTWZ Unit continues to remain with the Applicant. |
| b) | As and when the purchase orders are received by the Applicant from customers in India, the Applicant would raise sale invoice on the customer. |
| c) | The customer would clear the warehoused goods by filing bill of entry for home consumption post assessment of applicable customs duty (i.e., BCD+SWS+IGST) and remove of goods from FTWZ Unit. |
4.6. The applicant submitted that as per Section 7(2) of IGST Act 2017, supply of goods imported into the territory of India, till they cross the customs frontiers of India should be considered as Interstate Supply. That as per proviso to Section 5(1) of IGST Act 2017, imported goods would be subject to IGST at the point where customs duty is levied. In the current case, levy and collection would be at the time of clearance from FTWZ Unit by customer of MEIPL on filing bill of entry for home consumption. That as per entry 8(a) of Schedule III, supply of warehoused goods to any person before clearance for home consumption is considered neither supply of goods nor supply of services.
4.7. The applicant submitted that in accordance with aforementioned provision, they are of the view that the transaction as described above falls under entry 8(a) of schedule III to CGST Act 2017 and accordingly IGST, over and above customs duty paid (BCD+IGST) at the time of clearance, is not applicable.
4.8. The applicant submitted that thus they have preferred this ruling for obtaining clarification on the issue that whether IGST is payable on the transaction of sale between the Applicant and the customers in India (i.e., DTA Unit/Customs Bonded Warehouse) before goods are cleared for home consumption i.e., sale of goods when stored in the premises of FTWZ Unit”.
4.9. The applicant submitted statement containing their understanding of applicability of IGST on transaction of sale of goods stored at the premises of FTWZ unit to customers in India, before clearance for home consumption wherein they have quoted the relevant key legal provisions under GST and the relevant notifications and referred to advance rulings pronounced by Tamil Nadu and Telangana Advance Ruling Authority on the similar question.
4.10. The applicant submitted that in view of the above they are of the view that the sale made by the Applicant from the premises of FTWZ Unit before clearance for home consumption is treated as “neither supply of goods nor supply of services” by virtue of entry 8(a) of Schedule III and IGST is not applicable on the said transaction in addition to customs duties payable at the time of filing bill of entry for home consumption”.
4.11. The applicant submitted the following documents:
i. Copy of FTWZ Facility Service Agreement made with TimeScan Logistics India Pvt. Ltd.
ii. Copy of Warehouse Service Agreement with Kintetsu World Express (India) Pvt Ltd.
5.1. The applicant is under the administrative control of State Tax Authority. The concerned authorities of the Center and State were addressed to report if there are any pending proceedings against the applicant on the issues raised by the applicant in the ARA application and for the comments on the issues raised.
5.2. The concerned Central Authority vide Letter GEXCOM/TECH/ GST/3287/ 2023-TECH dated 15.02.2024 submitted that the question raised in the application is neither under investigation nor decided in any proceedings of their office.
5.3. The State authority has not reported anything, hence it is construed that there are no pending proceedings against the applicant on the issues raised by the applicant in the ARA application.
6. In the above circumstances, the Applicant has filed a letter dated 14.05.2024 and requested to withdraw their Advance ruling Application in GST ARA – 01, filed on 03.08.2023.
7. DISCUSSION AND FINDINGS:
We take on record the Applicant’s letter dated 14.05.2024, wherein they have informed that they had filed the application for obtaining clarification on whether IGST is payable on goods sold from FTWZ premises to customers in India, before clearance of goods for home consumption, in addition to customs duty payable i.e. BCD+IGST. However, keeping the view in the manner in which the questions have been raised for the purpose of determination, they expressed their intention to withdraw their application for Advance Ruling. Hence, the Applicant’s request is considered and the application is treated as withdrawn without going into the merits or detailed facts of the case.
Considering the request of the applicant, we rule as under:
RULING
The ARA Application in Si. No. 97/2023, dated 03.08.2023 filed by the Applicant seeking Advance Ruling is allowed to be withdrawn as per the request of the Applicant.
