No IGST Applicable on supply of imported goods on High Sea sale basis or from FTWZ facilities to Indian customers

As per the Advance Ruling Authority, Free Trade Warehousing Zone (FTWZ) is part of SEZ scheme and it is a customs bonded warehouse. An FTWZ operates similarly to an SEZ. They will be trading and warehousing Goods that are imported without payment of customs duty in these zones.

Further Rule 18(5) of SEZ Rules: MC&I(DC) SEZ Instruction No. 60 dated 6-7-2010 prescribe the conditions under which the FTWZ can hold goods on behalf of foreign suppliers, foreign buyers, DTA supplier, and DTA buyer.

The applicant imports goods and stores them in an FTWZ till he finds a local customer who will purchase the goods and such purchaser clears the goods under the Customs Act.

The transactions proposed to be made by the applicant are covered by Entry 8 of Schedule III of CGST/SGST Acts inserted vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019, i.e., supply of goods by the consignee to any other person, by the endorsement of document of title of the goods, after the goods, have been dispatched from the port of origin located outside India but before the clearance for home consumption; or supply of warehoused goods to any person before clearance for home consumption. And such transactions by virtue of Entry 8 of Schedule III do not attract tax under CGST or SGST or IGST Acts.

Further, according to the explanation to section 17(3) of CGST Act inserted vide CGST (Amendment) Act 2018, w.e.f. 1-2-2019 all transactions falling under Schedule III except Entry 5 will not be considered as ‘value of exempted supply for purpose of reversal of ITC of common input services. Therefore the value of the transaction referred to above will not form part of the value of the exempt supply.

The applicant directs the FTWZ warehouse keeper to deliver the goods to a customer chosen by the applicant. Under Section 10(1)(a) of the IGST Act, the place of supply in such case shall be the location of goods at the time of which the movement of goods terminates for delivery to the recipient.

Further the applicant i.e. supplier, in this case, is situated at Hyderabad, Telangana State whereas the goods are delivered in the Other States. That is the supplier of the goods and the place of supply of goods are in two different states. Therefore it is an inter-state supply. Hence the applicant need not obtain any registration in the Other State in order to effect such inter-state transactions.

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