The Gujarat Authority of Advance Ruling (AAR) ruled that goods and services tax (GST) will be payable on goods sold to an overseas customer shipped directly from an overseas vendor, while the location of the supplier continues to be in India.
The Authority further clarified that GST is not payable on goods procured from vendors located outside India, where the goods purchased are not brought into India, in an application filed by Sterlite Technologies Limited.
The applicant, M/s. Sterlite Technologies Ltd. is engaged in the development and supply of software with respect to the telecommunication qua wi-fi service management platform. OSS/BSS alongside packet core with the flexibility of modular and pre-integrated offerings etc. and trading in hardware. They procure requisite hardware from the vendor located within India or outside India on payment of applicable duties/taxes. Such hardware is sold as per the requirement of the customer on payment of GST, except in case of export.
The applicant proposed to undertake transaction and supply of hardware, commercially known as ‘Merchant Trade Transaction’, wherein the applicant will receive an order from the customer located outside India, and as per their instruction, Vendor would directly ship the goods to a customer located outside India. Vendors would issue an invoice on applicants against which payment would be made in foreign currency and applicants would raise invoices on customers and would receive consideration in foreign currency. In the above transaction, goods would not physically come into India but would move from place outside India to another place outside India.
The applicant sought the advance ruling on the issue of whether GST is payable on goods procured from vendors located outside India in a context where the goods purchased are not brought into India.
The other issue raised was whether GST is payable on goods sold to customers located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises.
The Authority consisting of members Mohit Agrawal and Sanjay Saxena ruled that goods and services tax (GST) will be payable on goods sold to an overseas customer shipped directly from an overseas vendor, while the location of the supplier continues to be in India.
“The transaction is covered under the ambit of Inter-state supply and is neither exempted nor covered under export of services. Thus, the theory of elimination takes us to the conclusion that such supplies will be subject to levy of IGST,” the ruling added.
Experts said the ruling on supplies goods bought from abroad and sold to a customer in another country without entering the Indian territory is set to cause uncertainty and anxiety among trade as it could escalate tax risk in businesses engaged in merchant trade transactions.
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