TMI Blog2018 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the goods remain under the possession of Schaeffer Germany. In short, the order received by the applicant from their customer in India and the order placed by applicant On Schaeffer Germany is in the nature of back to back order. Inter-state sale or intra-state sale - Held 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 the present case, 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. From the harmonious reading of Section 7(2) and Section 7(5)(a) of the IGST Act, it is clear 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. Levy and collection of GST - Held that:- As per Section 7(2) and 7(5) (a) of the [GST Act and proviso to Section 50) Of the IGST Act it is very clear that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds are sold, be eligible to avail the input tax credit of such goods? At the outset, we would like to make it clear that the provisions of both the CGST Act and the GST 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the transaction under consideration. Statement containing the applicant s interpretation of law and/or facts. as the case may be. in respect of the questions(s) on which advance ruling is required A. Levy of IGST cannot be 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, sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply in terms of section of IGST Act. A4. IGST would be levied on all inter-State supplies of goods or services or both in terms of Section 5 of IGST Act. From the conjoint reading of abovementioned provisions, it appears that T2, could get covered within the purview of Inter-State supply and hence could 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. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommendations of the Goods and Services Tax Council. Explanation . - Foy the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. B3. From the above, itis quite 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvited to section 16 of IGST Act, which provides that Zero rated supply means any of the following supplies of goods: 1. Export of goods; or 2. Supply of goods to a Special Economic Zone developer or unit D2. Section 2(5) of IGST Act defines export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place out of India. D3. From the conjoint reading 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 cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave reproduced relevant portion of section 12(3) of IGST Act, 2017 (3) The place of supply of services, (a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or (b) by way of lodging accommodation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cil has de liberated on the levy of Integrated Goods and Services Tax on high sea sales in the case of imported goods. The council has decided that 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 i.e. when the import declarations are filed before Customs authorities for the customs clearance purposes for the first time. Further, value addition accruing in each such high sea shall form part of the value on which IGST is collected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to levy tax on sale or purchase of goods which was carried outside the State or in the course of import or export of goods. Further, vide 101st Constitution (Amendment) Act, 2016, article 286 was amended to bring the same in line with provisions of GST law. Also, that Parliament is empowered to formulate the principles to determine when the supply is said to be made outside the State or in the course of import or export. However, no such principles have been formulated till date for GST. H4. The levying section 6 of GST Act provided that CST shall be levied on all inter-State 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the recipient of supply J1. One of the major objective of introducing GST in India was to allow the seamless flow of credit to the trade and industry to make the Indian business and Indian products cost effective and competitive in the international market. J2. It is pertinent to note that provisions of section 16 of CGST Act, 2017 read with section 20 of IGST Act, 2017, input tax credit of all the goods and/ or services may be available to the registered person. Further, section 16 of CGST Act, 2017 lays down various conditions for a person to become eligible to avail input tax credit which inter-alia include receipt of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntends that if a transaction is held to be liable qua the supplier and not the goods or services or both, then in the same analogy on the very transaction, the credit of input tax needs to be allowed based on the recipient and not whether the goods or services or both had been received or not. J6. If the transaction is deemed to be an inter-state supply and if the same is made liable to GST then it should be deemed that such goods have been received from perspective and the credit should accordingly, be made available to him. J7. Further, in order to achieve the objective of introduction of GST, the seamless flow of credit should be maintained and the recipient of goods should be made eligible 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or rejection of the application when Shi Nitin Shah, Advocate, Sh. Niraj Menon, C.A., and Sh. Anant Joshi, Manager Taxation appeared and requested for admission of application as per their contentions in ARA application. The jurisdictional officer, Shi Y. A. Lokre, Dy. Commr. Of ST. (PUN-VAT-E-610), Pune appeared and made written submissions. The application was admitted and final hearing was held on 26.06.2018, Sh. Nitin Shah, Advocate, Sh. Niraj Menon, C.A., and Sh. Anant Joshi, Manager Taxation appeared and made oral and written submission as per their ARA. The jurisdictional officer, Sh. Sanjay Shinde, Dy. Commr. of S.T. (PUN-VAT-E-610), Pune appeared and made written submissions. 05. OBSERVATIONS We have perused the records on 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 develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: 1. Levy of IGST cannot be extended beyond territorial jurisdiction of the said legislation. 2. Tax cannot be demanded on the said transaction as the collection, if at all tax is leviable, itself will be unconstitutional. 3. 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 authorized. 4. The term Zero-rated supply should be read in liberal manner and should not be restricted only to taking of goods outside India. 5. Place of Supply of Service specifically covers case where recipient is located outside India, unlike Place of Supply of Goods 6. Circular issued for High Sea Sales will be applicable to the transaction 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 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of inter-State trade or commerce. (3) .. (4) . (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 a Special Economic Zone developer or a Special Economic Zone unit; or (c) in the taxable territory, not being an intra-State 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. Intra-State supply. 8. (1) Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply: Provided that the following supply of goods shall not be treated as intra-State supply, namely: (i) supply of goods 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying the tax in relation to the supply of such goods or services or both. (4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services. Provided that where an electronic 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3 of the Customs Tariff Act. In view of this the imported goods sold from and to a non-taxable territory, though they are clearly in the nature of inter-state supply would come in the category of exempt supply as no duty is leviable on them except in accordance with proviso to Section 5(1) of the IGST Act. We find that in the definition of exempt supply as given in Section 2(47) of the CGST Act is as under:- Section 2(47) of the Central Goods and Services Tax (CGST) Act, 2017, exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply . Further we find that Section 2(78) of the CGST Act defines non-taxable supply which is as under:- As per Section 2(78) of the Central Goods and Services Tax (CGST) Act, 2017, non-taxable 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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