Supply of goods to overseas customers neither supply of goods nor supply of services: AAR

The applicant stated that they are a Private Limited Company registered under the provisions of GST Act 2017; they are engaged in trading of finished goods and also in providing support services to customers located outside India; they intend to enter into a new business transaction wherein the applicant would be engaged in supplying domestically procured goods to customers outside India.

In view of the above, the applicant has sought the advance ruling in respect of the following question:

“Whether the supply of goods from the Applicant to the overseas customer is taxable under GST as a zero-rated supply or not?”

Authority analyzed that there are two transactions involving the applicant. The first transaction is of the supply of goods by the manufacturer to the applicant and the second transaction is of the supply of the same goods by the applicant to an overseas customer.

It was seen that the person claiming ‘exporter’ is the owner of goods, and also the bill of lading is proof of title of goods when the goods are handed over to the shipper. Since the manufacturer files the shipping bill as the exporter and also gets the bill of lading issued to him, he is the owner of the goods and holds the title of goods till they cross the customs frontiers of India. In effect, the manufacturer takes the goods out of India to a place outside India while he is holding ownership and title ·of the goods, i.e., he exports the goods in terms of Section 2(5) of the IGST Act, 2017. Thus the manufacturer is the exporter of goods. Therefore in the first transaction of supply of goods by the manufacturer to the applicant, the place of supply of goods shall be the location outside India in terms of Section 11(b) of the IGST Act, 2017.

In respect of the second transaction involving the supply of the same goods by the applicant to overseas customer, it is observed that the goods are supplied from a location outside India to a location outside India, i.e., the supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. The said transaction is covered under Entry 7 of Schedule III of CGST Act, 2017 as a transaction or supply which shall be treated neither as a supply of goods nor a supply of services.

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