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Steel die prepared and Consumed/Scrapped in India and invoice raised to foreign client in foreign currency is not Export and is taxable as Intra-State Supply.

May 25, 2020

Facts

  • M/s. Dolphin Die Cast (P.) Ltd is an importer manufacturer and exporter of Aluminium and Zinc die Castings.
  • Applicant manufactures the Steel Die as per the requirement and specifications gave by the foreign customer. The applicant uses Steel Dies for making aluminium and Zinc Die Castings. These manufactured Aluminium and Zinc Die Castings are exported to the overseas customer.
  • The applicant also places an order for manufacture and supply of Aluminium casting and pressure die Casting component of Aluminium to Thailand supplier. Firstly Supplier manufacture dies as per the applicant direction.
  • Applicant and Thailand Supplier retains the Steel Die ll 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 not physically exported to the foreign customer.
  • Thailand Supplier also raises the invoice on the applicant for die though dies are not physically imported into India.
  • Aer the completion of the order or completion of the life of the die, the applicant/Thailand Supplier either Supplies the dies to the customer or scrap the die at their end as per the instructions of the customer.

Issue before the AAR

  • Whether to raise tax invoice addressed to foreign client and delivery to the applicant by paying GST and claiming of GST paid as ITC?
  • Whether to raise the self invoice and pay output GST and claim back the GST paid as ITC?
  • Whether to raise tax invoice addressed to the foreign buyer by paying GST under reverse charge mechanism?
  • Whether the applicant account the purchase commercial invoice and pay the GST under reverse charge mechanism?
  • Procedure to be followed under GST for discharging GST Liability

Provisions of Law referred

  • Sec 2(5) of IGST Act Secon 2(5) of the IGST Act defines the export of goods as – “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.
  • Sec 2(10) of the IGST Act defines the import of goods as – “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India
  • Sec 8(1) – Subject to the provisions of section 10, the supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply
  • Sec 10(1)(c) of IGST where the supply does not involve the movement of goods, whether by the supplier or the recipient the place of supply shall be the location of such goods at me of the delivery to the recipient

Discussion and Finding of AAR

  • The applicant raised the tax invoice for this die in the name of the overseas customer in foreign currency for receipt of payment through the die not physically moved out of India to the place outside India. Hence manufacture and supply of die to the foreign customer does not amount to export as per section 2(5) of the IGST Act,2017.
  • On date of issue of tax invoice, the die is with the applicant and it is not moved either by the applicant or by the foreign customer. Hence the place of supply of goods shall be the location of such goods at me of the delivery to the recipient as per Sec 10(1)(c) of IGST Act. Therefore, the place of the applicant.
  • the location of the supplier of die and place of supply of dying to the foreign customer are one and the same so this transaction shall be treated as an intra-State transaction as per sub-section (1) of section 8 of the IGST Act, 2017 and the applicant has to issue the CGST and SGST tax invoice to the foreign customer.
  • 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 die 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/inter-State 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 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.

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