authority for advance ruling: Goods purchased, sold overseas liable to GST in India: AAR – The Economic Times

Clipped from: https://economictimes.indiatimes.com

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.

The Gujarat Authority on Advance Rulings has said 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 has also said that GST is not payable on goods procured from vendor located outside India, where the goods purchased are not brought into India, in an application filed by Sterlite Technologies Limited.

“Applicable GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises,” the authority said.

“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.

“The ruling has not taken cognizance of Section 1(1) of the GST Act which says the Act extends to the whole of India except the State of Jammu and Kashmir and hence does not appear to be well reasoned,” said Harpreet Singh, partner for indirect tax, KPMG.

“This ruling though legally incorrect, but would escalate the tax risk in businesses engaged in merchant trade transactions, which may also lead to a degree of tax terrorism for exporters community,” said Rajat Mohan, senior partner at AMRG Associates.

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