Goods sold before custom clearance| No Separate GSTIN is required in importing state

Held by Hon’ble Authority of Advance Ruling, Maharashtra

In the case of M/S. KAMDHENU AGROCHEM INDUSTRIES LLP (GST-ARA-112/2019-20/B-87)

M/s. Kamdhenu Agrochem Industries LLP (“The Applicant”) is an importer and reseller of Chemicals. The Applicant has a principal place of business in Maharashtra and warehouses in Gujarat and Kerala. The Applicant has obtained GST registration for all 3 states. The application receives purchase orders from any other state, where GST registration is not obtained, and he, in turn, places such orders with Foreign Exporters. Goods are sent by foreign exporters to custom export of such a state and goods are directly sent to customers directly after custom clearance. The Applicant clears goods on payment of Custom duty and IGST under GSTIN of Maharashtra and then sell such goods to under Maharashtra GSTIN charging applicable IGST.

Further, The Applicant is also proposing to open a new warehouse in East coast of India where goods will be stored after custom clearance. Then goods will be sent to the customer from such a warehouse as and when asked for.

Now, Applicant seek Advance ruling on the following matters:

1. Question 1: Whether separate GST registration is required in the state where imported goods are sold directly to customer from CFS (Container Freight Station) / DPD (Direct Port Delivery) 

Precedence: As per the given case the applicant is selling the goods before clearing the same for home consumption. Therefore, the place of supply shall be the place from where the applicant makes a taxable supply of goods, i.e., Maharashtra. Therefore, the applicant can supply goods under GSTIN of Maharashtra and separate registration is not required in importing state

2. Question 2: Whether the Applicant is required to obtain registration in the State where the applicant is proposing to open a warehouse for sale of imported goods in front such warehouse? 

Precedence:  If the applicant opens a warehouse in Andhra Pradesh and further sale goods in Andhra Pradesh then such supply shall be considered as Intra-State Supply under section 8(1) read with Section 10(1)(a) of IGST Act. Therefore, as per section 96 of the CGST Act 2017, the Maharashtra Authority of Advance Ruling cannot interfere in the jurisdiction of a place other than Maharashtra, thus no ruling shall be passed on this Question.

3. Whether the applicant can issue an invoice from Maharashtra GSTIN for supply of goods from proposed warehouses in other states.

Precedence: The warehouse is located outside the state where the applicant is not registered. As per section 96 of the CGST Act, this Authority cannot acquire the jurisdiction of another state thus no ruling given on the question.

1. Brief Facts of the Case

• The applicant (M/s. Kamdhenu Agrochem Industries LLP) , is engaged in the business of importing chemicals and further resells such chemicals in India. The applicant has a principal place of business in the state of Maharashtra and warehouses in Gujarat and Kerala.
• The applicant is registered under GST in all 3 states.
• The Applicant intends to sell chemicals in other states also whether he is not registered under GST.
• The Applicant received an order from the state of Andhra Pradesh for 300 MT of urea and the Applicant further placed order with foreign exporter.
•  In one of the orders from M/s Greenpanel Industries Ltd, the applicant has short of stock with him so he placed an order for import of required quantity of goods. Foreign exporter shipped the goods directly to the Custom Port of Andhra Pradesh.
• The applicant cleared the goods by filing a Bill of Entry at Andhra Pradesh port under GSTIN of Maharashtra and paid applicable customs duty and IGST. Further, the applicant sold such goods to customers directly from port and raised an invoice under GSTIN of Maharashtra and charged IGST on the same.
• The Applicant also operates warehouses in the state of Gujarat and Kerala where imported goods are stored. Such goods are then sold from warehouses under GSTIN of respective states by charging CGST & SGST or IGST.
• Now, the Applicant is proposing to open a new warehouse in the eastern coast of India where he shall store the imported goods after clearance from custom authorities. Goods will be sold to customers from such warehouses. Now, the applicant intends to sell such goods by issuing invoices under GSTIN of Maharashtra and charging GSTIN.

2. Questions before Hon’ble Authority of Advance Ruling

To understanding applicability of GST on such transactions, the Applicant approached the Authority of Advance Ruling with the following questions:

1. Whether the Applicant is required to obtain the registration in importing States other than Maharashtra, if goods are imported, sold and delivered directly from CFS (Container Freight Station) / DPD (Direct Port Delivery) which is under the Customs Boundaries to customers from those States?
2. Whether the Applicant is required to obtain registration in the State where the applicant is proposing to open a warehouse for sale of imported goods from such a warehouse?
3. Whether issuing invoices under Maharashtra GSTIN is permissible in law for supply of imported goods from the proposed warehouse located in the State where the Applicant is not registered under GST?

3. Relevant Legal Extracts

The relevant extract of GST Law, which is applicable in the given case, is reiterated below for ready reference of reader:

1. Section 22 – Persons liable for registration

“(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both if his aggregate turnover in a financial year exceeds twenty lakh rupees:

…”

2. Section7: Inter-State Supply

“(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.”

4. Contention of the Applicant

The Applicant made his submission on the following grounds:

• The Applicant contended that as per Section 22 of CGST Act, the Applicant will be liable to obtain registration in the state from where taxable supply of goods or services is made.
• In the given case, even though goods are imported and stored in warehouse of other state, still,  the Applicant will be clearing the goods under GSTIN of Maharashtra and the supply of the said goods are commissioned from the office of the applicant in the State of Maharashtra.
• The Applicant also relied on following precedences wherein it was held that GST registration is not required in the state from where imported goods are sold:
  • Aarel Import Export Pvt. Ltd – GST ARA No. 114/2018-19 dated 24.04.2019.
  • Gandhaar Oil Refinery (India) Ltd – GST ARA No. 112/2018-19 dated 15.04.2019.

• The Applicant further added that warehouses are only used for supplying imported goods and he is not carrying out any business in the said States.
• Further, whether customers are located in same state or another state, the applicant is charging IGST on all invoices. Therefore, ultimately tax is flowing to the consumption state where the customer is located.
• Therefore, issuing invoice under GSTIN of Maharashtra will be sufficient compliance for the states where applicant is not registered.

5. Discussion and Finding of the AAR, Maharashtra

After analysing related provisions and seeing the details of Applicant’s submission the following outcome is concluded:

Question No. 1:- Whether the Applicant is required to obtain the registration in importing States other than Maharashtra, if goods are imported, sold and delivered directly from CFS (Container Freight Station) / DPD (Direct Port Delivery) which is under the Customs Boundaries to customers from those States?

• In the given case, it appears from the submission that the Applicant has sold imported goods before filing the Bill of Entry, i.e., before goods are cleared for home consumption.
• Therefore, as per Section 7(2) of the IGST Act, 2017, supply of goods imported in India shall be treated as inter-state supply.
• As per section 5(1) of the IGST Act, such goods are liable to IGST at the point when Custom duty is levied under section 12 of Customs Act, 1962. 
• Further, as per Section 11(a) of IGST Act 2017, with respect to imported goods, place of supply shall be the location of the importer. In the given case, the Applicant is registered in the state of Maharashtra, therefore, place of supply shall be Maharashtra.
• The applicant has sold the goods before clearing for home consumption. Therefore, the place of supply will be the place from where the applicant made the taxable supply which is the Maharashtra office.
• Hence, the applicant can supply the goods on the basis of invoices issued from Maharashtra Office and they do not neednot to take separate registration in the state of Import.

Question No. 2:- Whether the Applicant is required to obtain registration in a State where the applicant is proposing to open a warehouse for sale of imported goods in front such a warehouse?

• With respect to opening of new warehouses, the applicant will clear the imported goods for home consumption on payment of applicable Custom Duty and IGST and then will store such goods in the newly proposed warehouse. Sale of goods will take place from such warehouses. Therefore, sale of goods from the warehouse is different from import of goods.
• As per Section 10(1), place of supply for sale of goods from the warehouse will be the location of the goods at the time when movement terminates for delivery to the recipient. 
• In the given case, supply of goods/subsequent sale is happening in the state of Import. Therefore, as per Section 22(1) of CGST Act, registration is required to be obtained in the state from where taxable supply originates. It is an origin based provision and it requires registration in such a state.
• Further, in case of Aarel Import Export Pvt. Ltd. – GST ARA No. 114/2018-19 dated 24.04.2019:
  • The applicant has no office in the state of odisha and that goods would be cleared from the rented customs warehouse at paradip port, odisha.
  • Therefore, sale of goods was effected from custom warehouses, i.e., prior to clearance of goods for home consumption.
  • However, in the present case, the scenario is different as the applicant will be affecting further sales post custom clearance. Therefore, sales under discussion if further domestic sales after clearance of the imported goods into the country.
  • Question 2 has no relation with case of Aarel Import Export Pvt. Ltd.
• Also, in the case of Gandhaar Oil Refinery (India) Ltd – GST ARA No. 112/2018-19 dated 15.04.2019:
  • The applicant was unloading goods at the port warehouse and goods were sent to the customer directly from the port warehouse. Applicant was not having any godown or storage in the state.
• Therefore, this precedence is not applicable in this case.

• As per Section 22 of CGST Act,  if the sites of supply is determined on the basis of movement of goods and delivery of goods, then location of supplier of goods cannot be a deciding factor for determining nature of supply.
• In the given case, the applicant  is proposing to open a warehouse and will store goods there after custom clearance.
• If the applicant opens a warehouse in Andhra Pradesh and further sale goods in Andhra Pradesh then such supply shall be considered as Intra-State Supply under section 8(1) read with Section 10(1)(a) of IGST Act.
• As per section 96 of the CGST Act 2017, Authority of Advance Ruling is constituted under SGST/UTGST Act. Therefore, in the given case, the Maharashtra Authority of Advance Ruling cannot interfere in the jurisdiction of a place other than Maharashtra, thus no ruling shall be passed on this Question.

Question No. 3 :- Whether issuing invoices under Maharashtra GSTIN is permissible in law for supply of imported goods from the proposed warehouse located in the State where the Applicant is not registered under GST?

• As discussed above, supply of goods is occassing outside the state of Maharasthra therefore, same is outside the Jurisdiction of AAR, Maharashtra.
• Further, question of issuance of invoices under GSTIN of Maharashtra is related to procedure therefore, same outside the purview of AAR.

6. Order passed by Authority of Advance Ruling, Maharashtra

The Hon’ble AAR provided following answers to questions:

Question 1:-

Precedence: As per the given case the applicant is selling the goods before clearing the same for home consumption. Therefore, place of supply shall be the place from where the applicant makes taxable supply of goods, i.e., Maharashtra. Therefore, the applicant can supply goods under GSTIN of Maharashtra and separate registration is not required in importing state.

Question 2:- 

Precedence: Question is beyond the jurisdiction of Maharashtra Authority of Advance Ruling.

Question 3:- 

Precedence: Question is beyond the jurisdiction of Maharashtra Authority of Advance Ruling.