ITC reversal on high sea sale, Goods and Services Tax - GST

[Kaustubh Karandikar]

In case of 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, the same will not be treated as supply w.e.f. 01.02.2019 and therefore, proportionate ITC under Rule 42 is not required to be revered from 01.02.2019. Whether, in case of ‘High Sea Sale’ also same logic is to be applied and no ITC reversal or even today also proportionate ITC is required to be reversed for High Sea Sale by the first importer who is selling the goods when they are on high seas?

Posts / Replies

[KASTURI SETHI]

Issued by C.B.E. & C. as on 1-8-2019 for education purpose

9.4.26 Recent Law amendments w.e.f. 1-2-2019 :

9.4.26.5 The following transactions to be treated as no supply (no tax payable) under Schedule III :

a. 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;

b. Supply of warehoused goods to any person before clearance for home consumption;

c. Supply of goods in case of high sea sales

If High Sea Sale is 'no supply', no reversal is required.

[Rajagopalan Ranganathan]

Sir,

When an importer sells imported goods on high seas sales basis to a third party he is not required to pay duty/tax, namely, customs duties and IGST. Hence there is no question of taking credit or reversing credit by the original importer. Only the person who filed customs declaration with Customs authorities for the purpose of clearance of the imported goods for home consumption is required to pay customs duties and IGST. Only this person is eligible to take credit of IGST.

[Alkesh Jani]

Sir,

I agree with both the experts, in this regards Circular No. 33/2017-Cus dated 01.08.2017, may be referred. Moreover, supply of goods from non-taxable territory to another place in non-taxable territory will not apply to High Seas Sale.

Thanks

[Shilpi Jain]

Just mentioning the provision based on which the conclusion is drawn that high sea sales is not an exempt supply w.r.t. credit reversal.

Explanation to section 17(3) of the CGST Act, 2017

[Explanation. - For the purposes of this sub-section, the expression “value of exempt supply” shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.]

High sea sale is a schedule III item under below entry

8 (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.]

[Madhavan iyengar]

The provisions of law have been explained very well by all the experts

would like to add on reporting side how the high seas sales is required to be reported in GSTR-1 (High seas sales is categorised as a no supply )

a) GSTR-1 in table 8 column 4 - Non GST supplies

Though in GSTR-1 they have so far not mentioned the term no supply

b) in GSTR-9 under table 5 (F) Non-GST supply (includes no supply‘)

c) In GSTR-3B 3.1(e) Non gst outward supplies

[Mahadev R]

Would it be possible to take full ITC on services which are exclusively used for high sea sales and not common?

(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

1[Explanation.--For the purposes of this sub-section, the expression value of exempt supply shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.]

[Alkesh Jani]

Sir,

Please refer to reply given by our experts i.e. Shri Kasturiji, Rajagopalan Ranganathanji, Shilpiji, Madhavan iyengarji,

On going through the above, provisions are applicable to goods only and not to services.

Thanks