Judgement Alert: Whether transaction of transfer of title in moulds located in foreign country between two Indian Parties liable to GST


Judgement Alert: Whether transaction of transfer of title in moulds located in foreign country between two Indian Parties liable to GST

Posted By : Chitresh Gupta | 09-May-2020

FACTS

The Applicant is engaged in the supply of automative components such as Door Locks and Strikers including moulds and tools for wide range of customers. They agree to supply certain parts, including the moulds to an Indian company, located in the State of Tamil Nadu. They place an order for manufacturing the said parts and moulds on a Thailand Company (Foreign supplier). Accordingly, the foreign supplier manufactures the parts and the same are physically imported into India. However, the moulds developed by the foreign supplier are retained in Thailand and are not physically imported into India. Thus, there is only a transfer of ownership in the moulds from the foreign supplier to Applicant and further to Indian buyer.

 

ISSUE INVOLVED

“Whether GST will be applicable on the transfer of title in moulds from applicant to Indian Buyer and if Yes, whether the Indian buyer would be eligible to take credit of the GST paid to the applicant for said purchase?”

 

SUBMISSION

§  As per Applicant’s Interpretation of Law, the transaction between them and the Indian Buyer w.r.t transfer of title in moulds, the Place of Supply as per section 10(1)(c) would get attracted as there is no movement of goods and that in the present case would be Thailand. Since, the location of applicant is in India therefore the transaction would get covered under the ambit of Inter-State Supply under IGST Act. However, it seems that GST may not take within its fold a transaction wherein the place of supply is outside the territory of India. It thus appears that the transactions mentioned by the applicant may not fall within the purview of SGST/CGST or IGST.

§  The applicant contends that the said transaction does not constitute import of goods as there is no physical movement of goods into India. The moulds will be disposed as waste in Thailand after its usage for manufacturing the requisite parts. They have also stated that transaction was not taxable under the erstwhile indirect tax. Also the Parliament is empowered to formulate the principles to determine when the supply is said to be made outside the State or in the course of import or export. However, no such principles have been formulated till date for GST.

§  Further, the applicant has submitted that if at all tax is applicable on the transaction then input tax credit of the same should be available to the recipient of Supply. The applicant has stated that ITC should be applicable as per section 16(2)(b) of CGST Act 2017.

 

AAR FINDINGS

§  As per section 7(1) read with Schedule II, it is evident that ‘transfer of the title in goods’ is supply of goods. In the case at hand there is transfer in title of moulds for a consideration and the supply is in the course of business therefore, the same constitutes supply of goods and GST is liable to be paid on such supply.

 

§  It was further held that as per section 97(2) of the CGST Act / Tamil Nadu GST Act (TNGST) the scope of Advance Ruling Authority, i.e., the question on which the Advance Ruling can be sought. The eligibility to credit of input tax paid by the applicant alone is covered under clause (d) of Section 97(2). The eligibility at the buyers’ hand when raised by an applicant do not fall under any of the category specified under Section 97(2) of the Act and therefore not within the ambit of this authority.

 

Thus, the question w.r.t to eligibility to take credit by the Indian Buyer is not answered as the same is not in the ambit of this authority as per Section 97(2) of the Act.

 

 

COMMENTS

The envisaged transaction involves two transactions:

·       transfer of title in moulds from the foreign supplier to the applicant

·       transfer of title in moulds from the applicant to the Indian buyer

The ruling has covered the second leg of the transaction i.e. transfer of title in moulds from the applicant to the Indian buyer only. As per the ruling, the transaction of transfer of title in goods located in foreign country without movement of goods between two Indian Parties shall be liable to payment of GST.  However, as regards the first leg of transaction, there would be double taxation since transfer of title in moulds from the foreign supplier to the applicant may be liable to local indirect taxes as per the laws of the foreign country.



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