M/s. MARUBENI INDIA PVT. LTD

1.The applicant would hand over the Bill of lading and GST invoice to the overseas customer so as to allow the overseas customer to receive the shipment from overseas customer’s country port. The Indian Manufacturer, in the above transaction, would not, at any point, be issuing any invoice to the overseas customer nor be communicating directly / indirectly with the overseas customer

2.Applicant’s Interpretation of Law: The Applicant furnished their interpretation of law inter alia stating as under: The Applicant raises an invoice for goods being sold to the Overseas Customer. In this regard, as per the provisions of the CGST Act, 2017, IGST Act, 2017 and Karnataka GST Act, 2017 (‘collectively referred to as ‘GST law), for an activity to be taxable in India, the same must be covered under the definition of the term “supply”. Supply is defined under Section 7 of the Central Goods and Service Tax Act, 2017 (CGST Act, 2017). Relevant extract of Section 7 has been reproduced as below.

3.For the purposes of this Act, the expression “supply” includes,- All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. As per the above provisions, any sale of goods or services or both for a consideration would qualify as supply under the provisions of GST law. In the present case, the Indian Manufacturer is undertaking sale of goods to pplicant and delivering the goods directly outside India on direction of the t. Such a transaction of ‘Sale’ between the Indian Manufacturer and the

4.Applicant would amount to ‘supply’ under the GST Law. Further the above supply is merely a trading of goods transaction wherein agreement between Applicant and Overseas customer is on principal to principal basis. Similarly transaction between Applicant and Indian Manufacturer is also on principal to principal basis. Once we have established that there is, indeed supply of goods being undertaken between the Indian Manufacturer and the Applicant, It would be important to analyse whether the same qualifies as “export of goodsⁿ under the GST Law. The term ‘export of goods’ is defined under Section 2(5) of the IGST Act, 2017. Relevant extract of said section is as under 

5.export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India” A perusal of Section provides that taking goods out of India to a place outside India would be treated as export of goods. In the present case, the Indian manufacturer is undertaking the Custom Clearance as Exporter and undertaking issuance of bill of lading for transfer of title of goods. Such Bill of lading is transferred to Applicant from Indian Manufacturer for transferring ownership of the goods once, goods reach at port of Export beyond the Customs frontier. The Applicant further transfer such Bill of Lading to Overseas Customer along with its invoice to supply such goods to Overseas Customer and allow him to get such goods cleared from Overseas Customer’s Country port

(i) Accordingly, in the facts of the present case though Customs formalities are being undertaken by the Indian Manufacturer and shipping bill is filed by the Indian Manufacturer, but goods are actually being taken outside India by the Applicant. Accordingly, in our view, for the purpose of determination of tax on the transaction, the present transaction falls within the ambit of definition of ‘export of goods’ as Applicant is taking goods to a place outside India from a place within India, i.e., Applicant is taking the goods from the Customs Port to the Overseas Customer premises even though shipping bill is not filed by the Applicant.

(ii) Given that export of goods has been specified to be a ‘zero rated supply’ under Section 16 of the IGST Act, in our view, the transaction in question qualifies as Zero Rated Supply’ in accordance with Section 16 of the IGST Act, 2017. 5.7 As per Section 7(2)(a) of the CGST Act, 2017, certain transactions listed in Schedule Ill would not be treated as supply of goods or services. As per entry number 7 of the Schedule Ill, supply of goods from non-taxable territory to a place in non-taxable would not be treated as supply of goods for the purpose of CGST Act, 2017. Extract of said entry is as under  As per Section 1 1 of the IGST Act, 2017, place of supply of goods exported out of India shall be the location outside India. Hence, place of supply for goods supply by Indian Manufacturer to the Applicant would be the location outside India  Subsequently, the Applicant is supplying such goods to the Overseas Customer. Since, place of supply of goods supplied by Indian Manufacturer is outside India, it can be said that the Applicant is supplying goods from a location outside India to another location outside India. Accordingly, such transaction would fall under the ambit of entry number 7 of the Schedule Ill and would not be treated as supply for the purpose of GST law.

(iii) Hence, the Applicant humbly prays that in case the transaction is not treated as export of goods, it will still be covered under Schedule Ill and would not be subject to GST.

PERSONAL HEARING PROCEEDINGS

6.Ms. Neha Kishore, C A and Sri. Devansh Gupta, C A, Ernst & Young LLP & Authorised Representatives of the applicant appeared for personal hearing proceedings held on 29-09-2022 and reiterated the facts narrated in their application. However on request an additional personal hearing was granted on 10-11-2022 and Ms. Neha Kishore, C A, Sri. Devansh Gupta, C A, Ernst & Young LLP & Authorised Representatives  of the applicant along with Sri. Ranjit Ahluwalia, General Manager (Finance & Accounts) appeared for personal hearing through video conference and submitted their arguments.

FINDINGS & DISCUSSION

7.At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matters and differ from each other only on a few specific 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.

8.We have considered the submissions made by the applicant in their application for advance ruling. We also considered the issues involved on which ance ruling is sought by the applicant and relevant facts along with the ents made by the applicant & the submissions made by their learned rep es ntative during the time of hearing.

9.The applicant stated that they are a Private Limited Company registered under the provisions of CGST/KGST Act 2017; they are engaged in trading of finished goods and also in providing support services to customers located outside India; they intend to enter into a new business transaction wherein the applicant would be engaged in supplying domestically procured goods to customers outside India. In view of the foregoing, the applicant sought advance ruling as to “Whether the supply of goods from the Applicant to the overseas customer is taxable under GST as a zero rated supply or not.”

10.Facts relevant to the transaction as stated by the applicant are as under:

(i) a purchase order would be issued by the overseas customer, for certain goods, and the applicant places order for procurement of the required goods to the domestic manufacturer / vendor of the goods.

(ii) the applicant enters into a contractual agreement with the Indian Manufacturer making the said Indian manufacturer responsible for undertaking the applicable customs duty compliances such as documentation for outbound customs clearance as E?sporter and filing of Bill of Lading for transportation of goods to the overseas customer on the direction of the applicant. The applicant instructs the Indian manufacturer to ship the goods from their location/factory directly to the location of the overseas customer and thus the goods would be shipped from the Indian Manufacturer’s premises to a foreign destination, without delivering the goods physically to the applicant.

(iii) Two invoices will be raised in the transaction i.e. one invoiced by Indian Manufacturer on the Applicant and the other by the Applicant on Overseas Customer.

(iv) The consideration, for the said transaction, would be paid by the Overseas Customer either in advance or subsequent to receipt of the goods, in convertible foreign currency duly supported by the Bank Realisation Certificates (BRCs) which is credited into the foreign currency account maintained by the Applicant. Further the Applicant remits the payment to the Indian Manufacturer in foreign currency out of their foreign currency account maintained in India. The Applicant also stated that alternatively the Overseas Customer will open a Transferable LC in Foreign Currency in favour of applicant and the applicant, in that case, would then partially transfer the same LC in favour of the Indian Manufacturer for the price agreed upon and such transactions are covered under permitted transactions for EEFC accounts as allowed by RBI and FEMA guidelines.

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MARUBENI INDIA PVT. LTD

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Karnataka AAR

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