Kerala Advance Ruling on High Seas Sales and
Canteen Services
[Order No.
CT/2275/18-C3 Dated 26th March, 2018]
Authority for Advance Ruling - Kerala
Proceedings of the
Authority for Advance Ruling U/S.98 of the Goods and Services Tax Act, 2017.
Sub:-
GST Act, 2017 - Advance Ruling U/s 98 - liability to tax under GST Act - Orders
issued.
Read:-
Application dtd. 29.01.2018 from M/s. Synthite Industries Ltd., Ekm
1. M/s Synthite
Industries Ltd, Synthite Valley, Kadayiruppu
P O, Kolenchery, Ernakulam
District, Kerala - 682311 (hereinafter called the applicant) is a registered
person under GST having GSTN: 32AADCS5616E1ZQ.
2. They are in the business of
trading in spices and spice products. They have two modes of transactions. In
the first kind, the applicant receives order from a customer in USA for the
supply of spice products. They place a corresponding order to a supplier in
China for supplying the goods ordered by the customer in USA. The supplier in
China, based on the request of the applicant, ship the goods directly to the
customer in USA. In other words, the goods do not come to India. The Chinese
supplier issues invoice to the applicant, for which, payment will be made by
the applicant in due course. Subsequently, the applicant will raise invoice on
the customer in USA, and collect the proceeds.
3. In the other mode of
transaction, the applicant is availing storage facility in the form of a
presidential warehouse in Netherlands for storing their products and subsequent
delivery to their customers in and around Netherlands. The storage facility is
open to all, and interested entities across the globe can keep their products
there by paying applicable storage rent. The applicant is availing a portion of
the storage facility as and when required. They use the facility for quick and
timely delivery of their products to their customers based on demand. When an
order is received from the customer by the applicant, they can immediately
deliver the products from this warehouse and this reduces the freight expenses
and delay in delivery. These types of transactions are legally permitted and
they have obtained necessary permission from Reserve Bank of India. The
applicant wants to buy materials from a company in China in bulk and store it
in the presidential warehouse in Netherlands for subsequent delivery to various
customers in and around the country as small and medium lots based on demand.
The material is not coming to India at any point. The Chinese supplier will
invoice the applicant for which payment will be given in due course.
Subsequently, the warehouse authorities will arrange split deliveries to their
various overseas customers as per their instructions. The applicant would issue
invoice to the ultimate customers and collect the proceeds in foreign exchange.
4. The applicant in his
application dated 29.01.2018 has raised following issues for determination by
the Authority;-
1. Whether on procuring goods from
China, in a context where the goods purchased are not brought into India, is
GST payable by them?
2. On the sale of goods to the
company in USA, where goods sold are shipped directly from China to USA without
entering India, is GST payable by them?
3. On procuring goods from China
not against specific export order, in a context when the goods purchased are
not brought into India, is GST payable by them?
4. On the sale of goods from
Netherlands warehouse to their end customers in and around Netherlands, without
entering India, is GST payable by them?
5. On scrutiny of the application,
it was found that applicant had only paid a fee of Rs.5000/- whereas the
applicant was required to pay a fee of Rs.5,000/-each
under the CGST and SGST Rules.
6. The applicant was granted a
personal hearing on 13.03.2018. Shri. George Varghese, Senior Manager (Finance)
appeared on behalf of the applicant. He submitted proof of payment of the
balance fee of Rs.-5,000/-. In the written submission, dated 13.03.2018, the
applicant has submitted that they are engaged in the manufacture and export of
spice oils and oleoresins from India from 1972 and their annual turnover is
more than Rs.1500 crores. They have export trading house status granted by the
Ministry of Commerce and Industry, Government of India. They mainly purchase
spices such as pepper, ginger, cardamom, nutmeg, chillies,
turmeric, etc as raw materials and extract them with
solvents / chemicals to produce spice oleoresins. They are having manufacturing
facilities at Kerala, Tami Nadu, Karnataka and Andhra Pradesh. The applicant
submitted that around 80% of their turnover is from exports and the foreign
customers place order for various products.
7. The applicant also submitted
copies of the purchase order issued by them to the Chinese supplier; the
Invoice issued by the Chinese supplier; the Bill of Lading from China to USA
and the invoice issued by the applicant to their customer in USA.
8. On the basis of the facts
disclosed in the application, the oral and written submissions made at the time
of personal hearing and the documents produced during the personal hearing, it
was decided to admit the application.
9. As per Section 2(10) of the
Integrated Goods and Services Tax Act, 2017, "import of goods" with its
grammatical variations and cognate expressions, means bringing goods into India
from a place outside India.
As per sub-section (2) of Section
7 of the Integrated Goods and Services Tax Act, 2017, supply of goods imported
into the territory of India, till they cross the customs frontiers of India,
shall be treated to be a supply of goods in the course of inter-state trade or
commerce.
Sub -section (1) of Section 5 of
the Integrated Goods and Services Tax Act, 2017 states that, subject to the
provisions of sub - section (2), there shall be levied a tax called the
integrated goods and services tax in 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 the Central Goods and
Services Tax Act, and at such rates, not exceeding forty percent, as may be
notified by the Government on the recommendations of the Council and collected
in such manner as may be prescribed and shall be paid by the taxable person;
Provided that the integrated tax
on goods imported into India shall be levied and collected in accordance with
the provisions of Section 3 of the Customs Tariff Act, 1975, on the value
determined under the said Act at the point when duties of customs are levied on
the said goods under Section 12 of the Customs Act, 1962.
10. The Customs Tariff Act, 1975
was amended by The Taxation Laws Amendment Act, 2017 by introducing sub-section
(7) in Section 3 of the Customs Tariff Act, 1975 with effect from 01.07.2017 to
enable collection of integrated tax on the goods imported. The relevant
provisions of the amended Section 3 of the Customs Tariff Act, 1975 reads as follows:-
"(7) Any article which is
imported into India shall, in addition, be liable to integrated tax at such
rate, not exceeding forty per cent as is leviable under section 5 of the
Integrated Goods and Services Tax Act, 2017 on a like article on its supply in
India, on the value of the imported article as determined under sub-section
(8).
(8) For the purposes of
calculating the integrated tax under sub-section (7) on any imported article
where such tax is leviable at any percentage of its value, the value of the
imported article shall, notwithstanding anything contained in section 14 of the
Customs Act, 1962, be the aggregate of-^
(a) the value of the imported
article determined under sub-section (1) of section 14 of the Customs Act, 1962
or the tariff value of such article fixed under sub-section (2) of that
section, as the case may be; and
(b) any duty of customs chargeable
on that article under section 12 of the Customs Act, 1962 (52 of 1962), and any
sum chargeable on that article under any law for the time being in force as an
addition to, and in the same manner as, a duty of customs, but does not include
the tax referred to in sub-section (7) or the cess referred to in sub-section (9).
(12) The provisions of the Customs
Act, 1962 and the rules and regulations made thereunder, including those
relating to drawbacks, refunds and exemption from duties shall, so far as may
be, apply to the duty or tax or cess, as the case may be, chargeable under this
section as they apply in relation to the duties leviable under that Act.
The relevant provisions of the
Customs Act, 1962 are reproduced below;
SECTION
12.: Dutiable
goods. - (1) Except as otherwise provided in this Act, or any other law for the
time being in force, duties of customs shall be levied at such rates as may be
specified under the Customs Tariff Act. 1975, or any other law for the time being
in force, on goods imported into, or exported from, India.
(2) The provisions of sub-section
(1) shall apply in respect of all goods belonging to Government as they apply
in respect of goods not belonging to Government.
SECTION 15.:
Date for determination of rate of duty and tariff valuation of imported goods.
- (1) Rate of duty and tariff valuation, if any, applicable to any imported
goods, shall be the rate and valuation in force,-^
(a) in the case of goods entered
for home consumption under section 46, on the date on which a bill of entry in
respect of such goods is presented under that section;
(b) in the case of goods cleared
from a warehouse under section 68, on the date on which a bill of entry for
home consumption in respect of such goods is presented under that section;
(c) in the case of any other
goods, on the date of payment of duty:~
Provided that if a bill of entry
has been presented before the date of entry inwards of the vessel or the
arrival of the aircraft or the vehicle by which the goods are imported, the
bill of entry shall be deemed to have been presented on the date of such entry
inwards or the arrival, as the case may be.
(2) The provisions of this section
shall not apply to baggage and goods imported by post.
From a combined reading of the
above provisions of the IGST Act, 2017, the Customs Tariff Act, 1975, and the
Customs Act, 1962, it is evident that the integrated tax on goods imported into
India shall be levied and collected at the point when duties of customs are
levied on the said goods under Section 12 of the Customs Act, 1962 i.e.-on the
date determined as per provisions of Section 15 of the Customs Act, 1962.
11. When a question regarding the leviability of Integrated Goods and Services Tax [IGST] on
High Sea Sales of imported goods and point of collection thereof was raised
before the Central Board of Excise and Customs [CBEC], the CBEC by Circular No.
33/2017-Customs dated 01.08.2017had clarified as follows;
Subject: Leviability
of Integrated Goods and Services Tax (IGST) on High Sea Sales of imported goods
and point of collection thereof - regarding.
Reference has been received in the
Board regarding clarity on Leviability of integrated
Goods and Services Tax (IGST) on High Sea Sales of imported goods.
2. The issue has been examined in
the Board. 'High Sea Sales' is a common trade practice whereby the original
importer sells the goods to a third person before the goods are entered for
customs clearance. After the High sea sale of the goods, the Customs
declarations i.e. Bill of Entry etc is filed by the
person who buys the goods from the original importer during the said sale. In
the past, CBEC has issued various instructions regarding high sea sales
appropriating the contract price paid by the last high sea sales buyer into the
Customs valuation [Circular No. 32/2004-Cus dated 11-52004 refers]
3. As mentioned earlier, all
inter-state transactions are subject to IGST. High sea sales of imported goods
are akin to inter-state transactions. Owing to this, it was presented to the
Board as to whether the high sea sales of imported goods would be chargeable to
IGST twice i.e. at the time of Customs clearance under sub-section (7) of
section 3 of Customs Tariff Act, 1975 and also separately under Section 5 of
The Integrated Goods and Services Tax Act, 2017.
4. GST council has deliberated 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 the Customs authorities for the customs clearance purposes for the
first time. Further, value addition accruing in each such high sea sale shall
form part of the value on which IGST is collected at the time of clearance.
5. The above decision of the GST
council is already envisioned in the provisions of sub-section (12) of section
3 of Customs Tariff Act, 1975 inasmuch as in respect of imported goods, all
duties, taxes, cess, etc., shall be collected at the time of importation i.e.
when the import declarations are filed before the customs authorities for the
customs clearance purposes. The importer (last buyer in the chain) would be
required to furnish the entire chain of documents, such as original Invoice,
high-seas-sales-contract, details of service charges/commission paid etc, to establish a link between the first contracted price
of the goods and the last transaction. In case of a doubt regarding the truth
or accuracy of the declared value, the department may reject the declared
transaction value and determination the price of the imported goods as provided
in the Customs Valuation rules.~
12. The clarification given by the
CBEC in the above Circular regarding the leviability
of IGST and the point of collection thereof in respect of high sea sales of
imported goods is, mutatis mutandis, applicable in the case of the applicant.
13. In view of the above, we rule
as under;
RULING
The goods are liable to IGST when
they are imported into India and the IGST is payable at the time of importation
of goods into India.
The applicant is neither liable to
GST on the sale of goods procured from China and directly supplied to USA nor
on the sale of goods stored in the warehouse in Netherlands, after being
procured from China, to customers, in and around Netherlands, as the goods are
not imported into India at any point.
Senthil
Nathan S, IRS
N. Thulaseedharan
Pilllai
Member, CGST
Member, SGST
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