In re Panasonic Life Solutions India (P) Ltd. (GST AAAR Tamilnadu)
The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) recently addressed the GST implications of title transfers of goods stored in Free Trade and Warehousing Zones (FTWZ), specifically concerning Panasonic Life Solutions India (P) Ltd. The core issue revolved around whether such transfers fall under paragraph 8(a) or 8(b) of Schedule III of the CGST Act, 2017. Paragraph 8(a) pertains to the “supply of warehoused goods,” while 8(b) addresses “supply of goods by endorsement of documents of title.” The appellant argued that their transactions, involving title transfer within the FTWZ before clearance for domestic consumption, should be treated as akin to transfers through endorsement, as described in 8(b).
The AAAR, however, rejected this argument. It emphasized the significance of the phrase “by endorsement of documents of title” in 8(b), highlighting that mere title transfer through invoices does not equate to endorsement of documents like bills of lading or warehouse warrants. The authority referred to Section 2(4) of the Sale of Goods Act, 1930, to define “documents of title to goods,” underscoring that commercial invoices used by Panasonic Life Solutions did not qualify. The AAAR clarified that paragraph 8(b) is specifically designed for situations like high sea sales, where endorsement of documents is crucial.
Having ruled out the applicability of paragraph 8(b), the AAAR then examined paragraph 8(a), which concerns the supply of warehoused goods. The appellant contended that FTWZ warehouses should not be equated with customs bonded warehouses under the Customs Act, 1962. However, the AAAR asserted that FTWZ warehouses are indeed bonded warehouses, akin to customs bonded warehouses, operating under the SEZ Act, 2005. The authority cited provisions of the SEZ Act and SEZ Rules, 2006, along with public notices and circulars issued by customs authorities, to demonstrate the integration of SEZ cargo delivery systems with the Customs EDI System (ICES). They noted the use of warehouse codes and bill of entry types that apply to both customs bonded and FTWZ warehouses, affirming that warehousing in FTWZ falls within the ambit of paragraph 8(a).
Regarding the reversal of Input Tax Credit (ITC) under the amended Section 17(3) of the CGST Act, 2017, the AAAR modified the Advance Ruling Authority’s (AAR) decision. While the AAR had ruled that proportionate ITC reversal was required, the AAAR clarified that the amended section, read with Explanation 3 of Rule 43 of the CGST Rules, 2017, does not mandate ITC reversal for FTWZ transactions unless they pertain to supplies from duty-free shops at arrival terminals in international airports. The AAAR pointed to the legislative intent, as reflected in the minutes of the 47th GST Council meeting, which specifically targeted duty-free shop supplies for ITC reversal.
In conclusion, the AAAR upheld the AAR’s ruling that the supply of goods within FTWZ before clearance for home consumption falls under paragraph 8(a) of Schedule III of the CGST Act. However, it modified the ruling on ITC reversal, stating that it is not applicable to Panasonic Life Solutions’ transactions. The ruling reinforces the distinction between title transfer and endorsement of documents, and clarifies the treatment of FTWZ warehouses under GST.
Read order also: GST on Goods Stored in FTWZ: AAR’s Ruling
FULL TEXT OF THE ORDER OF AUTHORITY OF APPELLATE ADVANCE RULING, TAMILNADU
