Introduction:
As per Section 22 of the CGST Act,2017, every supplier shall be liable to be registered in the State or Union territory from where he makes a taxable supply of goods or services or both, if aggregate turnover exceeds the prescribed limit. Now a question arises in regard to GST registration of the importer i.e. whether an importer of goods needs to obtain registration in the State where port of import of goods is located, from where he is directly supplying the goods to its customers.
On this issue there can be two set of arguments i.e. as the supply of goods is being made directly from the State where port is located , registration is required to be obtained in such State, whereas other set of argument is that as there is no permanent establishment of the importer in the State where port is located there is no need for registration in such State and rather supply will be treated to be made from the State where the importer is already registered.
For getting finality on the issue we may refer to the ruling of Karnataka AAR in the the case of M/s Kardex India Storage Solution Private Limited wherein it has been adjudged that Importer of Goods is not required to obtain GST registration in the state where port of import of goods is located. The ruling is discussed below:
Facts of the case:
- Applicant is the importer of storage solutions and vertical storage solutions (machines) from Germany and further supplies the goods imported to industrial customers all over India.
- At the time of filing application, applicant used to first transport goods to its registered place of business i.e. Bangalore and then supplied the goods to industrial customers all over India, however the applicant came across a lot of logistical problems and found it costly.
- In view of this , the applicant intends to import the goods to the port nearest to the customers place and supply directly to customer’s location from the said port of import. However, the applicant intends to issue the bill / tax invoice fro the said transaction from the registered place of business.
Questions on which ruling is sought:
The applicant seeks advance ruling on following issues:
1.Whether the applicant can take credit of IGST paid on import of goods?
2.Whether applicant can issue tax invoice with IGST to the customer?
3.Whether applicant needs to obtain registration in the State where the port of clearance is located?
Order of Karnataka AAR: Highlights and Ruling
- The applicant intends to import goods to the nearest port located at customer’s place and supply the goods directly from port to customers’ place.
- The applicant is having the permanent business establishment only in the State of Karnataka and is registered under GST law also in State of Karnataka. The applicant uses this GSTIN for the purpose of import of goods and also payment of IGST on import of goods.
- The applicant is liable to pay IGST on goods imported by him in India and according to Section 20 of IGST Act, IGST paid can be utilized as credit of Input Tax of imported goods which are used in course or furtherance of his business.
- The place of supply in case of import of goods , is the location of the importer in terms of Section 11(a) of the IGST Act, 2017 and in the case of applicant the location of importer is the State of Karnataka where he is GST registered.
- In case the customer’s place is located in Karnataka , the applicant should charge CGST + SGST being intra-State supply , else it should charge IGST.
- The applicant is registered in State Karnataka and uses such GSTIN in the bill of entry for import of goods and payment of IGST. Since the applicant already registered under GST Act, no provisions under the CGST / SGST Act mandates any person to obtain registration again in the place of port where applicant obtain the custom clearance for further supply of goods. Hence there is no need for the applicant to obtain separate registration , if he does not have an establishment in that State and affecting supplies from that location.
In view of above the Karnataka AAR adjudged as under:
- The applicant is eligible to claim credit of tax paid on import of goods as per section 20 of the IGST Act 2017 read with section 16 of the CGST Act, 2017.
- The applicant can issue tax invoice with IGST to the customer as per section 20 of the IGST Act 2017 read with section 31 of the CGST Act 2017 for the interstate transaction as provided under section 7(1) of the IGST Act 2017, when the goods are directly dispatched from the port of import with invoicing done from the registered place of business.
- The applicant need not obtain GST registration in the State where the port of clearance is located, if he is not making any supply from the State in which the port is located.
Our view
The above Ruling is on expected lines and similar to the ruling given by Maharashtra AAR in the case of M/s Aarel Import Export Private Limited and M/s Sonkamal Enterprises Private Limited. However the important aspect which needs to kept in mind is that above rulings will come into play only if the person does not have any fixed establishment in the State where port is located.
In case fixed establishment of the importer exists in the State where port is located, GST registration would become mandatory in such State where port of clearance is located.
For ready reference of our readers the order of Karnataka AAR can be read as under:
The Order can also be downloaded from below:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
