Fact: M/s. The Bank of Nova Scotia, India, (“the Applicant”) is a leading multinational financial service provider in India, having market leadership in the bullion business. The Bank became the first Bullion bank to set up its operations in India way back in 1997 under the brand name Scotia Mocatta. Since then, Scotia Mocatta has been at the forefront of the bullion industry being the largest supplier of precious metals. Through its network of branches and its bullion vauits established across India, it caters to the bullion requirements of Jewellers, Exporters, Nominated agencies such as Minerals & Metals Trading Corporation (MMTC), Banks & Mutual Funds (Gold ETF’s).
Issues Involved: The applicant has sought advance ruling in respect of the following questions:
- Whether IGST is payable on Goods warehoused in Free Trade Warehousing Zone (“FTWZ”) and supplied to a DTA unit, in addition to the customs duty payable [i.e. Basic Customs Duty (BCD) + IGST] on removal of goods from the FTWZ unit?
- Whether the Circular No. 46/2O17 is applicable to the present factual situation?
Applicant’s Interpretation of law: The Applicant has submitted that FTWZ is a special category of Special Economic Zone as per Section 2(Za) of SEZ ACT, 2005. As per proviso to Rule 8 of CGST rules 2OI7, SEZ/FTWZ unit and Domestic Tariff Area (DTA) unit of BSNI will obtain separate GST Registrations and the units would be treated as distinct persons under CGST Act. Hence, the transaction of transfer of goods from FTWZ to DTA unit of BSNI can fall within the ambit of supply. Further as per circular 46/2017, the Central Board of Excise & Customs (CBEC) has clarified that in respect of goods stored in a customs bonded warehouse, there is a possibility that certain cases may involve an additional taxable event, if a transfer of ownership of warehoused goods takes place between the importer and another person, before clearance of the goods, whether for home consumption or for export and therefore, be taxable as an ‘inter-state’ supply under Section 7(2) of the IGST Act.
Further, the applicant has stated that removal of goods from FTWZ unit to DTA unit of BNSI being an import transaction, subject to Customs duty under Customs Act, cannot be said to have another separate taxable event to attract IGST under the IGST Act. The Applicant has submitted that levy of IGST twice in such a situation would completely defeat the purpose of introduction of GST and is completely unwarranted. The applicant pleaded that the removal of goods from FTWZunit to a DTA unit of BNSI should not be subject to IGST under the Section 5 read with Section 7(2) of the IGST Act.
Held: The Hon’ble AAR of Tamil Nadu vide its Order No. 23/AAR/2018 dated December 31, 2018 stated with reference to Circular No.3/1/2O18-IGST dated May 28, 2018 which clarified that the supply of goods before their clearance from the warehouse would not be subject to the levy of Integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse, under the provisions of Customs Act. This circular was made applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse on or after April 01, 2018. In view of the above, AAR of Tamil Nadu rule as under:
- For supply of warehoused goods, while being deposited in FTWZ on or after April 01, 2018, the Applicant is not liable to pay IGST at the time of removal of goods from the FTWZ to DTA under the provisions of IGST Act in addition to the duties payable under Customs Tariff Act, 1975 on removal of goods from the FTWZ unit.
- Circular No, 46/2017 Customs dated November 24, 2017 is not applicable for supply of warehoused goods, while being deposited in a FTWZ on or after April 01, 2018.
Citation: [2019] 102 taxmann.com 38 (AAR – TAMILNADU)