AAR rules on taxability of high seas supplies, holds that goods which are sold on high seas sale basis are ‘non-taxable supply’ as no tax is leviable on them till the time of Customs clearance in accordance with Section 12 of Customs Act r/w Section 3 of Customs Tariff Act; Notes that as per the arrangement, applicant would be buying products from overseas related party at arm’s length pricing against purchase orders received from customers in India and before goods cross the Customs frontier, would be sold by applicant to such customers;
Perusing the provisions of 7(2) of IGST Act, AAR observes that supply of goods imported into territory of India till they cross the Customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce, and therefore, “clearly the transaction in these goods is in the nature of inter-state supply”;
In terms of Section 5(1) of said Act, IGST on goods imported into India is to be levied and collected in accordance with Customs law, i.e. only at the time of import or export of goods;
In view of this, the import of goods sold on high seas sales basis, though they are clearly in the nature of inter-state supply, would come in the category of “exempt supply” as no duty is leviable on them except in accordance with proviso to Section 5(1) of IGST Act; Observes that said legal position is further reiterated and confirmed by CBIC Circular No. 3/1/2018-IGST, while stating that Input Tax Credit to the extent of inputs, input services and common input services would be required to be reversed as per Section 17 of CGST Act : Maharashtra AAR
Citation-[TS-275-AAR-2018-NT]