TMI Blog2021 (4) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant are treated as supply under GST? - HELD THAT:- Schedule III, relevant to Section 7 of the CGST Act 2017, at clause 7 specifies that 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 shall be treated neither as a supply of goods nor a supply of services - supply of books from the warehouse located in USA (non-taxable territory) to the customers located in USA, UK and Canada (non-taxable territory) without such books entering into India does not amount to supply under GST, in terms of clause 7 of Schedule III, relevant to Section 7 of the CGST Act 2017. Whether GST is levied on the shipping charges collected by the applicant from the customers located in USA, UK and Canada (non-taxable territory) for the delivery of books from the warehouse located in USA (non-taxable territory) to the customer located in located in USA, UK and Canada (non-taxable territory)? - HELD THAT:- The supplier providing the shipping services to the applicant is outside India, the recipient of the said service i.e. the applicant is within India and the place of supply is in India in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HOOD UR REHMAN FAROOQUI, MEMBER Represented by : Sri. Veeresh S Kandgol, Chartered Accountant Duly Authorised Representative ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 AND UNDER SECTION 98(4) OF THE KGST ACT, 2017 M/s. Guitar Head Publishing LLP, # 306/A, Ground Floor, 13th Cross, Near LCA Ramesh Nagar, Marathahalli, Bengaluru-560037 having GSTIN 29AAVFG2223Q1ZN, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017, read with Rule 104 of CGST Rules 2017 and Section 97 of KGST Act, 2017 read with the KGST Rules 2017, in FORM GST ARA-01 discharging the fee of ₹ 5,000/- each under the CGST Act and the KGST Act. 2. The applicant is engaged in business of selling guitar training books in United States of America, United Kingdom and Canada through their website. The applicant sends soft copy of the book to the printer located in USA, who in turn prints it and ships to the customers located in USA, UK and Canada. Further, in another business model the applicant is having an agreement with Amazon Inc. who through their website amazon.com based on the choice of the customers either prints the books and sells it to the consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e guitar training books to every individual in the countries of USA, UK and Canada either as paperback books or e-books and also reach entire global market at the earliest. The main intention for guitar training books is that, in learning music from musician - there are few limitations like: long duration, physical attendance for training. But, with the applicant's guitar training books, every individual can learn at their leisure time. 3.3 Business model: The applicant has three models: a) Sales through own website b) Sales through Amazon platform c) Online Guitar training courses through the website of Guitar Head A. Sales through own website: In this transaction, customer in USA, UK and Canada places an order through Applicant's website by making payment in Foreign Currency. Applicant places the bulk order with the printer, who prints and supplies to the warehouse. The books are stored in the warehouse for quick delivery to the customer. The applicant shares the order details to the warehouse service provider, who in turn ships the books to customer. The applicant pays printing charges, warehouse charges and shipping charges to the respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability to pay tax on any goods or services f) Whether applicant is required to be registered g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term 4.4 Thus, as per the said section, advance ruling may be sought by the applicant on the questions concerning determination of the liability to pay tax on goods or services or both and on the eligibility to avail input tax credit. 4.5 Therefore, the applicant in the instant case is eligible to file the present advance ruling application before Karnataka Authority for Advance Ruling, Bangalore. 5. APPLICANT'S INTREPRETATION OF LAW: 5.1 As mentioned in the above business model A , Whether the supply of books from the warehouse located in USA (non-taxable territory) to the customers located in USA, UK and Canada (non-taxable territory) without such books entering into India by the applicant are treated as supply under GST?? a. Section 7 of the IGST Act, 2017 lays down the principle to determine the nature of transaction as inter-state transaction. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USA, UK and Canada (non-taxable territory). Accordingly, according to the applicant, without prejudice to his submission herein below, the place of supply would be outside India. d. From the conjoint reading of 'supplier' and 'place of supply', the applicant states that it appears that supplier is located in India and place of supply is construed as outside India. Hence, the said transaction could get covered under the ambit of inter-state supply in terms of section 7(5)(a) of the IGST Act. e. According to the applicant, as the sale of books made by the applicant to the end customer before the goods crossing the customs frontier of India is treated as High sea Sales and are in the nature of inter-state supplies, the liability to tax in respect of books would be as per Section 5 of the IGST Act which reads as under'- Section 5(1) of the IGST Act, lays that there shall be a tax called integrated goods and service tax on all inter-state supplies of goods or services or both , except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of CGST Act and such rates not exceeding forty percent, as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India. h. Further the CGST Amendment Act, 2018 applicable from 01.02.2019 has added para 7 under Schedule III which lays that supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering India is covered under negative list Thus the supply of goods from a place in non-taxable territory to another place in non-taxable territory is treated as Neither Supply of Goods nor a Supply of Services and it is outside the scope of definition of supply. i. Alternately the applicant draws attention to section 16 of IGST Act, which provides that 'zero rated supply' means any of the following supplies of goods: i. Export of goods; or ii. Supply of goods to a SEZ developer or unit 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 outside India . j. 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... composite supply which comprising two or more supplies, one of which is a principle supply, shall be treated as a supply of such principal supply . b. The determining factor for the services to be considered as naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which service relate. Where there is movement of goods, services of transportation, in-transit insurance and loading/unloading, being ancillary to the principle supply of goods, shall be treated to taxation under Section 8 (a) of the CGST Act and the consideration receivable on that account be taxed at the rate of principal supply. c. Thus, we are of the view that supply of books along with shipping charges, where in supply of books is a principle supply and shipping charges being naturally bundled in the ordinary course of business is an ancillary supply. Hence leviability of GST for shipping charges depends on the taxability of principal supply being supply of books. d. Therefore, the applicant states that he is of the view that the supply of books being covered under Schedule III and shipping charges being ancillary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 17(3) of the CGST Act, lays that 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 c. The CGST Amendment Act, 2018 has inserted explanation to Sub-section (3), 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. d. It is relevant to note from the above provisions that transactions listed in Schedule III are NOT SUPPLIES and hence they are neither exempt supplies' nor are they 'non-taxable supplies. Thus, no credit would be required to be reversed for engaging in transactions referred under Schedule III. e. The applicant states that in the present case, since the supply of books from one non-taxable territory to another non-taxable territory without the books entering India covers under Schedule III, no reversal of credit would be required for engaging in these transactions and the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. 9. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by Sri. Veeresh S Kandgol, Chartered Accountant and Duly Authorized Representative of the applicant during the personal hearing. We also considered the issues involved, on which advance rulings are sought by the applicant, relevant facts and the applicant's interpretation of law. 10. The applicant sought advance ruling, with regard to business model 'A', in respect of the questions mentioned at para 2 supra. In this business model, customers in USA, UK and Canada places an order through applicant's website by making payment in Foreign Currency. The applicant places the bulk order with the printer, who prints and supplies to the warehouse. The books are stored in the warehouse for quick delivery to the customer. The applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e India, a non taxable territory, by the agent of the applicant. Thus the shipping charges collected by the applicant from the customers located outside India for delivery of books from the warehouse located outside India to the customer located outside India are not exigible to GST, as explained at para 11 supra. The applicant is not actually shipping the books to the customers but arranging the shipping through his agent outside India and has not furnished any copy of contractual agreement with the warehousing agent to act as pure agent of the applicant to incur expenditure towards shipping of the books. Thus the applicant is in receipt of the service of shipping the books from the warehousing agent outside India. In view of the above, it is clearly evident that the supplier providing the shipping services to the applicant is outside India, the recipient of the said service i.e. the applicant is within India and the place of supply is in India in terms of Section 13 of the IGST Act 2017. Thus the impugned service squarely qualifies to be an import of service, in terms of Section 2 (11) of the IGST Act 2017, in the hands of the applicant and hence the amount paid by the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice squarely qualifies to be an import of service, in terms of Section 2(11) of the IGST Act 2017, in the hands of the applicant. Hence the printing charges for printing of books charged by the Printer located in USA (non-taxable territory) is taxable under Reverse Charge Mechanism under GST, where only content is supplied by the applicant. 14. The fourth question is Whether the services received by the applicant from Foreign service provider such as warehousing of printed books located in USA (non-taxable territory) is taxable under Reverse Charge Mechanism under GST? We proceed to examine whether the impugned service i.e. warehousing of printed books located in USA is covered under import of service or not. We invite reference to Section 2 (11) of IGST Act, 2017, in terms of which import of Service has been defined as a supply of service where -The supplier of service is located outside India; -The recipient of service is located in India; and -The place of supply of service is in India; In the instant case we observe that, though the supplier is located outside India and the recipient is located in India, the place of supply of service is outside I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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