CBIC’s clarification w.r.t maintenance of records, delivery challan, etc., for goods sent/taken out of India for exhibition/consignment basis

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The activity of sending/taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I (“specified goods”) of the CGST Act, 2017 (“CGST Act”), do not constitute supply as the said activity does not fall within the scope of Section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as “Zero rated supply” as per the provisions contained in Section 16 of the IGST Act, 2017 (“IGST Act”).

Such goods sent/taken out of India crystallise into exports, wholly or partly, only after a gap of a certain period from the date they were physically sent/taken out of India. Since the activity of sending/taking specified goods out of India is not a supply, issues relating to maintenance of records, issuance of delivery challan/tax invoice etc were raised.

The CBIC vide Circular No. 108/27/2019-GST dated July 18, 2019, has clarified the doubts of various trade and industry regarding the procedure to be followed in respect of goods sent/taken out of India for exhibition or on consignment basis for export promotion, in the following manner:

S.No.

Issue

Clarification

1.

Whether any records are required to be maintained by registered person for sending/taking specified goods out of India?

The registered person dealing in specified goods shall maintain a record of such goods as per the format at Annexure to this Circular
2.

What is the documentation required for sending/taking the specified goods out of India?

The said activity is in the nature of “sale on approval basis” wherein the goods are sent / taken outside India for the approval of the person located abroad and it is only when the said goods are approved that the actual supply from the exporter located in India to the importer located abroad takes place.

Documents required for sending / taking the specified goods out of India are as under:

(a) The specified goods shall be accompanied with a delivery challan issued in accordance with the provisions contained in Rule 55 of the CGST Rules, 2017 (“CGST Rules”).

(b) As clarified the activity of sending/taking specified goods out of India is not a zero-rated supply. That being the case, execution of a bond or LUT, as required under Section 16 of the IGST Act, is not required.

3.

When is the supply of specified goods sent/taken out of India said to take place?

The specified goods sent/taken out of India are required to be either sold or brought back within the stipulated period of six months from the date of removal as per the provisions contained in sub- Section (7) of Section 31 of the CGST Act.

a) Specified goods are neither sold abroad nor brought back within the stipulated period: The supply would be deemed to have taken place, on the expiry of six months from the date of removal.

b) If the specified goods are sold abroad, fully or partially, within the stipulated period: the supply is effected, in respect of quantity so sold, on the date of such sale.

4.

Whether invoice is required to be issued when the specified goods sent/taken out of India are not brought back, either fully or partially, within the stipulated period?

a) When the specified goods sent/taken out of India have been sold fully or partially, within the stipulated period: The sender shall issue a tax invoice in respect of such quantity of specified goods which has been sold abroad, in accordance with the provisions contained in Section 12 and Section 31 of the CGST Act read with Rule 46 of the CGST Rules.

b) When the specified goods sent/taken out of India have neither been sold nor brought back, either fully or partially, within the stipulated period: The sender shall issue a tax invoice on the date of expiry of six months from the date of removal, in respect of such quantity of specified goods which have neither been sold nor brought back, in accordance with the provisions contained in Section 12 and Section 31 of the CGST Act read with Rule 46 of the CGST Rules.

5. Whether the refund claims can be preferred in respect of specified goods sent/taken out of India but not brought back?

The said activity of sending/taking specified goods out of India is not a zero-rated supply. That being the case, the sender of goods cannot prefer any refund claim when the specified goods are sent/taken out of India.

The sender can prefer refund claim even when the specified goods were sent/taken out of India without execution of a bond or LUT, if he is otherwise eligible for refund as per the provisions contained in sub-Section (3) of Section 54 the CGST Act read with sub-rule (4) of Rule 89 of the CGST Rules, in respect of zero rated supply of goods after he has issued the tax invoice on the dates as has been clarified in answer to the question no. 4 above.

It is further clarified that refund claim cannot be preferred under Rule 96 of CGST Rules as supply is taking place at a time after the goods have already been sent/taken out of India earlier.

Complete Circular with attached Annexure can be accessed at: http://www.a2ztaxcorp.com/wp-content/uploads/2019/07/circular-cgst-108.pdf