Kerala AAR in the case of M/s Synthite Industries Ltd

Case Covered:

M/s Synthite Industries Ltd

Facts of the case:

1. M/s Synthite Industries Ltd, Synthite Valley, Kadayiruppu P 0, Kolenchery, Ernakulam District, Kerala – 682311 (hereinafter called the applicant) is a registered person under GST having GSTN: 32AADCS5616E1ZQ.

2. They are in the business of trading in spices and spice products. They have two modes of transactions. In the first kind, the applicant receives an order from a customer in the USA for the supply of spice products. They place a corresponding order to a supplier in China for supplying the goods ordered by the customer in the USA. The supplier in China, based on the request of the applicant, ship the goods directly to the customer in the USA. In other words, the goods do not come to India. The Chinese supplier issues invoice to the applicant, for which, payment will be made by the applicant in due course. Subsequently, the applicant will raise an invoice on the customer in the USA, and collect the proceeds.

3. In the other mode of transaction, the applicant is availing storage facility in the form of a presidential warehouse in the Netherlands for storing their products and subsequent delivery to their customers in and around the Netherlands. The storage facility is open to all, and interested entities across the globe ‘can keep their products thereby paying applicable storage rent. The applicant is availing a portion of the storage facility as and when required. They use the facility for quick and timely delivery of their products to their customers based on demand. When an order is received from the customer by the applicant, they can immediately deliver the products from this warehouse and this reduces the freight expenses and delay in delivery. These types of transactions are legally permitted and they have obtained the necessary permission from Reserve Bank of India. The applicant wants to buy materials from a company in China in bulk and store it in the presidential warehouse in the Netherlands for subsequent delivery. to various customers in and around the country as small and medium lots based on demand. The material is not coming to India at any point. The Chinese supplier will invoice the applicant for which payment will be given in due course. Subsequently, the warehouse authorities will arrange split deliveries to their various overseas customers as per their instructions. The applicant would issue the invoice to the ultimate customers and collect the proceeds in foreign exchange.

Issues Raised Before Tribunal:

The applicant in his application dated 29.01.2018 has raised the following issues for determination by the Authority;

1. Whether on procuring goods from China, in a context where the goods purchased are not brought into India, is GST payable by them?

2. On the sale of goods’ to the company in the USA, where goods sold are shipped directly from China to the USA without entering India, is GST payable by them?

3. On procuring goods from China not against specific export orders, in a context when the goods purchased are not brought into India, is GST payable by them?

4. On the sale of goods from the Netherlands warehouse to their end customers in and around the Netherlands, without entering India, is GST payable by them?

Observations:

The clarification was given by the CBEC in the above Circular regarding the leviability of IGST and the point of collection thereof in respect of high sea sales of imported goods is, mutatis mutandis, applicable in the case of the applicant.

Ruling:

The goods are liable to IGST when they are imported into India and the IGST is payable at the time of importation of goods into India.

The applicant is neither liable to GST on the sale of goods procured from China and directly supplied to the USA nor on the sale of goods stored in the warehouse in the, after being procured from China to customers, in and around the Netherlands as the goods are not imported into India at any point.

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