The Karnataka AAR recently in the application filed by M/s Dolphine Die Cast (P) Ltd (Advance Ruling No. KAR ADRG 35/2020 vide its order dated 20.05.2020 has in regard to manufacture and supply of die, adjudged that without physical movement of dies outside India / in India the supply cannot be regarded as exports / imports.Further it has been adjudged that such supply by Indian supplier would be exigible to CGST + SGST and supply by foreign supplier to Indian buyer will not be subject to GST, if die does not come into India.
The highlights of the order are as under:
Supply of die to foreign customer not physically moved outside India is not export and is subject to CGST + SGST
- FACTS
- Manufacture of die is made as per requirement and specification given by foreign buyer and tax invoice is immediately raised after manufacture in name of overseas buyer in foreign currency for receipt of payment though the die is not physically moved out of India to a place outside India. This die is used for manufacture and export of aluminium and zinc die casting to the foreign buyer by retaining the die with them till the completion of export order or completion of die life.
- RULING OF AAR
- In this case as the manufacture and supply of die to the foreign supplier does not involve physical movement of goods outside India it will not amount to export as per Section 2(5) of the IGST Act, 2017. Further as per Section 10(1)(c) of the IGST Act, 2017 the place of supply shall be location of such goods at the time of delivery to the recipient which in this case would be location of the applicant viz supplier.
- Being intra-State supply as per Section 8(1) of the IGST Act, 2017, applicant has to issue CGST and SGST invoice to the foreign customer and liable to collect and pay the CGST and SGST.
- Applicant is not eligible to CGST and GST payment on invoice raised by it as ITC, as he is not the recipient.
- If the die is scrapped at applicant’s end as per instruction of overseas customer without moving it outside , while making supply of die scrap to the third party, the applicant has to issue intra/ inter-State invoice depending upon nature of transaction and collect and pay the applicable tax.
Supply of die to foreign supplier not physically moved into India is not import and not subject to IGST
- FACTS
- Manufacture of die is made by foreign supplier as per requirement and specification given by Indian buyer and tax invoice is immediately raised after manufacture in name of Indian buyer for receipt of payment though the die is not physically moved into India. This die is retained by foreign supplier for use in manufacture of aluminium casting and pressure die casting component of aluminium to the applicant. Die will be retained till the completion of order or life of die.
- RULING
- In this case as the manufacture and supply of die by the foreign supplier does not involve physical movement of goods into India it will not amount to import as per Section 2(10) of the IGST Act, 2017.
- If applicant physically imports the die then it will have to pay IGST under reverse charge mechanism and claim IGST paid as input tax credit, subject to conditions applicable.
- If the die belonging to applicant is scrapped at a location of the overseas supplier without die coming into India, then such transaction is occurring outside the taxable territory i.e. India and hence not under purview of GST Acts.
The order of Karnataka AAR is as under for ready reference of the readers.
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