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TMI Blog2018 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the COST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS AS PROVIDED IN ANNEXURE 1 Brief Background of the Transaction: * INA Bearings India Private Limited (hereinafter referred to as 'Applicant') is engaged in supply of bearings and tools. The Applicant supplies bearings to a wide range of customers which inter-alia include Original Equipment Manufacturers (OEM). * It is pertinent to note that for manufacture of bearings for specific customer, a specific type of tool is required. These tools are developed basis the requirements of the customers. Using these specially designed tools, child parts are manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended beyond territorial jurisdiction of the said legislation. Evaluating IGST provisions to understand possibility of levying IGST A1. With reference to facts of the applicant summarized in Annexure 2, the transaction of supply of tool to customer in India by Applicant needs to be evaluated in terms of IGST Act to understand nature of transaction and to evaluate applicability of IGST. A2. Section 7 of IGST Act, 2017, lays down the principles to determine nature of transaction as inter-state transaction. In this regard, attention is invited to provision of section 7(5) which reads as under: '(5) Supply of goods or services or both,-- (a) when the supplier is located in India and the place of supply is outside India; (b) to or by Special Economic Zone developer or a Special Economic Zone unit: or (c) in the taxable territory', not being intra-Stale supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.' (Emphasis provided) A3. In order to evaluate applicability of section it is pertinent to evaluate following aspects of transaction in question - * Supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d become liable to IGST. A5. However, Applicant intends to draw your kind attention to section 1(2) of IGST Act which determines the extent of applicability of IGST Act. As per the said section IGST Act extends to whole of India except State of Jammu and Kashmir. 'India' has been defined in section 2(56) of CGST Act read with section 2(24) of IGST Act to mean 'the territory of as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters;' A6. Hence, Applicant wishes to contend that scope of IGST Act is limited to territorial jurisdiction ta which it extends. Thus, IGST levy can be introduced only to supplies within the territorial jurisdiction of the IGST Act. In case of T2, the supply could be construed to take place outside the territorial jurisdiction of IGST Act. Hence, the levy in case of T2 in terms of section 5 of IGST Act read with section 7(5)(a) would mean traveling b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te clear that Article 269A enables levy and collection of GST for supplies in the course of inter-state trade of commerce. An explanation has been inserted stating that import transactions will also be considered as inter-state supply of goods or services or both. If we consider the common parlance an inter-state transaction would mean transaction effected between two states and or union territories. It would be important to note that the Constitution has not defined the above transaction that is, where the supplier is located in India and the place of supply is outside India to be an inter-state supply. The provisions of section 7(5)(a) is ultra vires since the law has defined a specific transaction to be an inter-state supply without having adequate powers to do So. Since the Constitution of India has neither defined such transactions to be an inter-state transaction nor given powers to determine so, the provisions ought to be treated as ultra-vires. C. Cross-border transactions are being covered under 'Inter-State supply' only to exclude the same from purview of State Government. however, that would not conclude IGST applicability unless authorised C1. Applicant wishes to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading of the above-mentioned provisions it can be inferred that any inter-state supply would qualify to be zero-rated only if it falls within the purview of export or supply to SEZ. D4. In order to identify these supplies as Zero-rated the same have been covered under the purview of inter-State supply. However, this cannot be interpreted to mean that all other supplies falling within the purview of Section 7(5)(a) of IGST Act but not covered under section 16 of IGST Act would be considered as liable to IGST. D5. The terms 'Export' covers the cases of taking goods out of India, however, principally even tool being supplied to customer at d location outside India should get covered under the purview of term 'Export'. Interpreting the term 'Export' to only cover supplies where goods are taken out of India would be restrictive and would disregard the principle of consumption based tax. 'Export of goods' should be interpreted in a broader way to cover such cross-border transaction where goods are delivered to a customer outside India even if not taken from India. Restricting the concept of export only to cases involving movement from India would mean disregarding the fact that place o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or (c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or (d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located: Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient. E4. It can be observed from the aforesaid provisions that there is specific provision in case of services wherein it is specifically provided that the place of supply shall be the location of immovable property, however, if both the supplier and recipient are in India and location of immovable property is outside India then the place of supply for the purpose of GST will be location ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected at the time of clearance.' F3. The Circular clearly mentions that the tax is leviable only at the time of importation of goods in India and not when the goods the sold while they are in High Seas. Similarly, when the goods are in Germany i.e. outside India, it can be said that since, the goods are outside India, no GST is applicable on the same as the subject on which tax is being levied is outside the territory of India. F4. Another circular was issued by CBEC to clarify the tax applicability of goods lying in bonded warehouse. Circular No. 46/2017-Customs dated 24th November 2017, provided that in case the goods are sold while the same lying in bonded warehouse, the same shall be chargeable to GST. F5. It is pertinent to note that one of the basic reasons behind differential tax treatment in both the circulars above is that in case of High Seas the goods are not in India while in case of warehoused goods, the goods are in India. F6. Given the aforesaid, the Applicant hereby submits that the tax on supply of tools will not be applicable when the same are sold to its customers in India and where the physical location of the goods is outside India. G. No state code ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of goods. Similar to GST, CST Act specifically defined inter-State supplies, sale in the course of import, sale in the course of export and intra-State sale out of which only inter-State sale was made liable to CST. H5. Section 5 of CST Act, 1956 provided for the principles to determine whether the transaction is a sale or purchase in the course of import or export and the same are reproduced below: (1) A sale or purchase of goods shall be deemed to take place in the course of the export the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. (3) ........ (4) ........ (5) ........' H6. From the above, it can be understood that even under CST Act, similar type of transaction was not liable to CST. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods and/ or services. J3. The relevant provisions of section 16 of CGST Act, 2017 is reproduced below: (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise-- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible to avail the input tax credit. J8. Also, if the input tax credit is denied the domestic products may became expensive and that may have implications on 'Make in India' initiative of Government of India and State Governments as well. CONCLUSION 1. In view of the above submissions, the transaction of sale/ supply of goods by the supplier in India should not be made liable to IGST under section 7(5) (a) of IGST Act, 2017 since, the intention behind section 7(5) (a) was to specifically provide that export or import of goods and/or services should be treated as inter-state transaction and not to tax the transactions under consideration. 2. If at all the transaction is made taxable, the recipient should be eligible to avail the input tax credit. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Question raised. (a) Whether the sale of goods, which are located outside India would be liable to tax in India u/s 7(5) (a) of IGST Act 2017? Explanation: As per section 7(2) of IGST Act 2017 which is reproduced below: Supply of goods imported into the territory of India, shall be treated to be a supply of goods in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file and gone through the facts of the case and the submissions made by the applicant and the department. The factual matrix of the case is as below: Applicant is engaged in supply of bearings and tools. The Applicant supplies bearings to a wide range of customers which inter-alia include Original Equipment Manufacturers (OEM). For manufacture of bearings for specific customer, a specific type of tool is required. These tools are developed on the basis of the requirements of the customers. Using these specially designed tools, child parts are manufactured and supplied to their customer. The sample transactions are submitted by the applicant before us which were entered into for supply of bearings between the applicant and one of the customer M/s. Renault Nissan Automotive India Pvt Ltd, Tamil Nadu. Applicant have two purchase orders as below: a. PO No. RNIAIPL/2013/B4A/PTVT/230 dated 13.09.2013 for supply of tools and b. PO No. RN15-MP-113W-K316 dated 28.05.2015 for supply of tappets. In order to comply with purchase orders received by the applicant, applicant in turn places purchase orders for manufacture of tools on M/ s. Schaeffer Technologies AG & CD. KG, Germany (for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction under consideration. 7. To state code available in GST returns to mention the Place of Supply in case of these transactions 8. The transaction was not taxable under erstwhile indirect tax laws and hence, the same should not be liable to GST. 9. VAT is payable on the said transaction under European VAT Laws. 10. If at all tax is applicable on the transaction, then input tax credit of the same should be available to the recipient of supply In view of the above, applicant submits that the transaction of sale/supply of goods by the supplier in India should not be made liable to IGST under section 7(5) (a) of IGST Act, 2017 since, the intention behind section 7(5) (a) was to specifically provide that export or import of goods and/ or services should be treated as inter-state transaction and not to tax the transactions under consideration. Alternatively the applicant submit that if at all the transaction is made taxable, the recipient should be eligible to avail the input tax credit. We feel the need to examine only the contentions of the applicant at (4), (5) and (6) above, as these would be sufficient to answer the questions raised by the applicant. From the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to or by a Special Economic Zone developer or a Special Economic Zone unit; (ii) goods imported into the territory of India till they cross the customs frontiers of India; or (iii) supplies made to a tourist referred to in section 15. From the reading of Section 7(2) of the IGST Act We find that Supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce. In addition to what is stated above we find that the location of the applicant as a supplier of goods is in India and the place of supply of goods is outside India i.e. Germany and such impugned transaction get clearly covered by the scope of section 7(5) (a) of the Act. As a result the transaction is in the nature of interstate trade and commerce. Thus from the harmonious reading of Section 7(2) and Section 7(5)(a) of the IGST Act and the discussion held in this behalf herein above we clearly find that the transaction referred to as T2 gets covered under the ambit of Interstate trade and commerce. And thus liable to tax as per Section 5 of the IGST Act which reads as under: 5 Levy and collection. (1) Subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. From the transactions placed by the applicant before us there is no doubt that the goods of the applicant would be imported goods if they are brought from outside the country into India and it is clear that when the location of the supplier is in India and the said goods are delivered/ supplied from a place outside India to a place outside India, these goods have not crossed the customs frontiers of India, thus clearly the transaction in these goods are in the nature of Inter-state supply as per Section 7(2) and 7(5)(a) of the IGST Act. We find that proviso to Section 5(1) of the IGST Act states that "Provided that the integrated tax on go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply" means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act". Thus it is very clear that the goods sold in the subject transaction are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975. We find that the above legal position is further reiterated and confirmed by Circular No. 3/1/2018-IGST dated 25.05.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing. 6. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-04/2018-19/B-60 Mumbai, dt. 09/07/2018 For reasons as discussed in the body of the order, the questions are answered thus - Question:-Whether the sale of goods, which are located outside India, would be liable to tax India under section 7(5) (a) of Integrated Goods and Services Tax Act, 2017? Answer: - Answered m the Negative. Que ..... X X X X Extracts X X X X X X X X Extracts X X X X
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