This is to apprise you on a recent decision of Authority for Advance Ruling, Karnataka (‘AAR’) in case of Dolphin Die Cast (P) Limited, 2020-VIL-125-AAR. In this case, the Applicant sought ruling on GST implications on purchase of die from / and sale of die to a person located outside India without its physical movement. The relevant facts of the case, decision of AAR and our comments, is outlined hereunder:

 

Brief facts

 

• The Applicant located in India, was engaged in manufacture and export of aluminium and zinc die castings (‘final products’) to customer located outside India (‘foreign buyer’).

 

• The Applicant manufactured die on behalf of foreign buyer as per latter’s specifications. The applicant transferred ownership of die to foreign buyer. There was no physical movement of die and die was retained by the Applicant to manufacture final products.

 

• At the end of useful life of die, die would either be exported to foreign buyer or scrapped at the Applicant’s end as per directions of foreign buyer.

 

• Similarly, the Applicant purchased die from a supplier located outside India (‘foreign supplier’). Die was retained by foreign supplier for manufacturing final products. At the end of useful life of die, die would either be imported by the Applicant or scrapped at the foreign supplier’s end as per the Applicant’s directions.

 

• The Applicant sought ruling on GST implications on both abovementioned transactions.

 

AAR’s Decision

 

• The AAR noted that the terms ‘export’ and ‘import’ of goods are defined under Section 2(5) and Section 2(10) of the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’) as under:

 

• Export of goods: Taking goods out of India to a place outside India

 

• Import of goods: Bringing goods into India from a place outside India

 

• Basis above, the AAR concluded following GST implications on the abovementioned transactions:

 

Sale of die to foreign buyer

 

• The transaction does not qualify as export of goods as die was not sent to a place outside India. In the absence of movement of goods, place of supply will be location of goods at the time of sale i.e. location of applicant [Section 10(1)(c) of the IGST Act]. Thus, CGST and SGST will apply as location of the supplier and place of supply is in the same State.

 

• At the end of useful life of die, GST implications will be as under:

 

• Die exported outside India – No GST will be payable as it will qualify as export of die

 

• Die scrapped at the Applicant’s end – Applicable GST will be payable

 

NITYA Comments:

 

This ruling is correct that in the absence of physical movement of goods on their sale to foreign buyers, the transaction does not qualify as export and exigible to GST.

 

Purchase of die from foreign supplier

 

• The transaction does not qualify as import of goods as die is not imported from outside India. Since location of supplier and place of supply is outside India, no GST is applicable.

 

• At the end of useful life of die, GST implications will be as under:

 

• Die imported from outside India – GST will be payable under Reverse Charge Mechanism (‘RCM’)

 

• Die scrapped at foreign supplier’s end – No GST will be applicable

 

NITYA Comments:

 

This Ruling is correct except that it states that GST is payable under RCM on import of dies. In case of import of goods, GST is payable under the Customs law and not IGST Act. Such transaction is outside the purview of GST law by virtue of proviso to Section 5(1) of the IGST Act.