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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.

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.

The applicant has raised following issues for determination by the Authority for Advance Ruling -

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 ware hcuse to their end customers in and around Netherlands, without entering India, is GST payable by them?

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.

After extracting the relevant provisions of the Integrated Goods and Services Tax Act, 2017, and the Customs Tariff Act, 1975 as amended by The Taxation Laws Amendment Act, 2017, the Authority observed -

++ 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.

Adverting to the clarification given in the Board Circular No. 33/2017-Customs dated 01.08.2017 on the subject of 'Leviability of integrated Goods and Services Tax (IGST) on High Sea Sales of imported goods and point of collection thereof', the Authority concluded that the same is, mutatis mutandis , applicable in the case of the applicant.

Inasmuch as the AAR ruled thus –

++ 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.

(See 2018-TIOL-02-AAR-GST)

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GST - As goods are not imported into India at any point, no IGST liability on sale of goods procured from China and directly supplied to USA: AAR

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