It is not considered to be a “supply of goods” or a “supply of services,” according to Marubani India Pvt Ltd. Karnataka AAR.

As per  the Karnataka Authority for Advance Ruling (AAR), the sale of goods to a client in another nation is not a sale of goods or a provision of services.

The two-person bench, M.P. Ravi Prasad and Kiran T. Reddy, claim that the petitioner is involved in two transactions. In the first, the manufacturer provides the applicant with certain commodities; in the second, the applicant sells those same things to a foreign customer.

Issue

Whether or not the applicant’s delivery of goods to the foreign customer is taxed under the GST as a zero rated supply?

The Indian manufacturer agrees to furnish the items and carry out all export compliances, including submitting the shipping bill as an exporter and obtaining the bill of lading from the shipper, in accordance with the agreement with the application. Given that the manufacturer moves the goods from India to a location situated  outside of India while still in possession of ownership and title to the goods, exporting the products complies with Section 2(5) of the IGST Act of 2017.

The AAR ruled that the person claiming to be the “exporter” is the rightful owner of the commodities and that the bill of lading serves as evidence of ownership when the goods are given to the shipper. Therefore, the exporter of commodities is the maker. Therefore, in accordance with Section 11(b) of the IGST Act of 2017, the place of supply of products for the manufacturer’s supply to the applicant shall be outside of India.

According to a recent ruling by the Karnataka Authority for Advance Rulings (AAR), the provision of commodities to clients abroad falls under neither the definition of a supply of goods nor a supply of services under Entry 7 of Schedule III of (CGST), 2017.

 The applicant, M/s. Marubeni India Pvt. Ltd., is a private limited company that has been authorized under the CGST/Karnataka Goods and Services Tax Act, 2017, to sell finished goods as well as provide support services to customers outside of India. They intended to enter into a new business arrangement where the applicant would be in charge of delivering goods acquired domestically to customers outside of India.

Additionally, the applicant entered into a contract with the Indian manufacturer, transferring responsibility for completing customs duty compliance, including submitting the Bill of Lading for Transportation of Goods to the Foreign Customer on the applicant’s instruction. The items would be shipped from the Indian Manufacturer’s premises to a foreign location without being physically delivered to the applicant since the applicant requested the Indian Manufacturers to ship the goods from their location/factory directly to the location of the overseas customer.

The court noted that there were two invoices raised in the transaction, one from the Indian Manufacturer to the Applicant and one from the Applicant to Customers Abroad. The petitioner is involved in two transactions, it was also noted. In the first transaction, the manufacturer provides goods to the applicant; in the second, the applicant provides the same commodities to a global customer.

When asked what the term “exporter” meant, the panel of Dr. M. P. Ravi Prasad and Kiran Reddy T. clarified that the person claiming to be a “exporter” is actually the owner of the goods, and that the bill of lading acts as proof of ownership when the items are transferred to the shipper. The manufacturer filed the shipping bill as an exporter and received a bill of lading, making him the owner and possessor of the goods.

The manufacturer’s initial transaction of supplying goods to the applicant is, thus, the place of supply of goods in accordance with the observations, and as per section 11(b) of the Integrated Goods and Services Tax Act (IGST), this location shall be outside of India.

The commodities are supplied from a site outside India to a location outside India in the second transaction, it is noted. Both of the locations are outside of India. The transfer of products from one location in a non-taxable territory to another location there without those goods entering India. As a result, it was decided that the transaction mentioned above should not be considered a provision of goods or services.

Topic: It is not considered to be a “supply of goods” or a “supply of services,” according to Marubani India Pvt Ltd. Karnataka AAR

NAME: SARAH GARIMA TIGGA SEMESTER: VI, COLLEGE: SYMBIOSIS LAW SCHOOL (PUNE)

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