No ITC can be claimed on Tax Invoice addressed to Foreign Buyer, If the Applicant is not Recipient of Goods: AAR [Read Order]

The Authority of Advance Ruling (AAR), Karnataka ruled that no Input Tax Credit (ITC) can be claimed on the tax invoice addressed to foreign buyers, if the applicant is not the recipient of goods.

The applicant, M/s Dolphine Die Cast Pvt. Ltd. is a manufacturer and exporter of Aluminium and Zinc die Castings. The applicant first manufactures the Steel Die as per the requirement and specifications are given by the foreign customer. After seeking approval from the foreign customer, the applicant uses Steel Dies for making Aluminium and Zinc Die Castings. These manufactured Aluminium and Zinc Castings exported to the overseas customers along with sub-assemblies and other components against the order. However, the applicant retains the Steel Die until the completion of the export order or completion of the life of the die.

The applicant has raised the tax invoice for the steel die in the name of the overseas customer in foreign currency for receipt of payment through the die nor physically exported to the foreign customer. However, after the completion of the export order or completion of the life of the die, the applicant can either export the dies to the overseas customer or scrap the die at the applicant’s end as per the instructions of the customer.

The applicant sought the advance ruling on the issue whether the applicant raises the tax invoice addressed to the foreign buyer and delivery to applicant works by paying output GST and claiming back by the applicant as input GST.

The Authority consisting of members M.P. Ravi Prasad and Mashud Ur Rehman Faruqui ruled that in the case of manufacture of Die by the applicant and invoiced to the recipient, without moving the goods, the applicant has to raise the tax invoice addressed to the foreign buyer. Since it is an intra-State supply, he has to collect the CGST and SGST and discharge the liability. The applicant is not eligible to claim said payment as an input tax credit on the invoice raised by him as he is not the recipient. Further, if the said steel dies is scrapped at applicant’s end as per the instruction of the overseas customer without moving out of the country, while supplying the die scrap to the third party, the applicant has to issue intra/interstate tax invoice depending upon the nature of the transaction and collect and pay the applicable tax as per the provisions of the GST Acts.

“In the case of manufacture of Die by the Thailand supplier, if applicant physically imports the Die to a place in India then the applicant has to pay the IGST on reverse charge mechanism and claim the IGST tax paid as an input tax credit, subject to conditions applicable. Further, if the steel dies belonging to the applicant is scrapped at the location of the overseas supplier without die coming to India, then such transaction is occurring outside the taxable territory, i.e. India and hence not under the purview of GST Acts,” the authority ruled.