Supply of Maritime Products from Bonded Warehouses to Vessels not liable to GST

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Categories: Advance Ruling
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Facts:

M/s. Wilhelmsen Maritime Services Pvt Ltd (“WMSPL”), has the largest maritime services network in the world supplying a wide portfolio of maritime goods and Services worldwide to every conceivable vessel type, in every market and region. WMSPL imports the goods from foreign countries and keeps them either in Bonded Warehouse or Non-Bonded Warehouse and supplies the same to ships proceeding to a foreign port from the Indian Sea-ports.

WMSPL has levied taxes w.e.f July 1, 2017  and paid GST under protest on all its “Maritime Products” supplies. If the supply is made from the warehouse to the located in the same state, WMSPL has charged CGST and SGST (assuming it as Intra State) and if the port is in a different state then IGST is charged (assuming it as Inter-State).

Delivery of goods to ship proceeding to a foreign port is done in the following ways:

  1. The goods can be delivered from the Bonded Warehouse by paying the Duty.
  2. The goods can be delivered from the Non-Bonded Warehouse by paying the Duty.
  3. The goods can be delivered from the Bonded Warehouse in Bond.

Issues involved:

  1. Whether the delivery of goods to the owner of the ship proceeding to foreign port at the Indian port is covered under Schedule III of the CGST Act, 2017 (“CGST Act”)?
  2. Whether the taxes paid on the said supply of Maritime Products will be termed eligible as refund of zero rated supplies? If Not, then whether the supply will be leviable to CGST & SGST or IGST?

Held:

The Hon’ble AAR, Maharashtra vide Order No. GST-ARA-136/2018-19/B-71 dated June 15, 2019, held–

  • In this case, the supply of warehoused goods to any person before clearance for home consumption mentioned under clause 8(a) of Schedule III is of two types, namely;
  1. Clearance from Bonded Warehouses to the vessels, and
  2. Clearance from Non-Bonded Warehouses to the vessels.
  • A bonded warehouse is a secured area in which dutiable goods may be stored, without payment of duty. Upon entry of goods into the warehouse, the importer and warehouse proprietor incur liability under a bond which is generally cancelled when the goods are exported or deemed exported, withdrawn for supplies to a vessel or aircraft in international traffic, destroyed under Customs supervision, or withdrawn for consumption domestically after payment of duty. Thus, it can be said that goods in a Bonded Warehouse have not been cleared for home consumption.
  • Therefore, supply of warehoused goods to any person before clearance for home consumption would cover as clearance from Bonded warehouse to the vessels,  hence the supply of maritime products, in such a case will fall under Schedule III of CGST Act. Further it was held that clearance from non-bonded warehouse to the vessels would cover as the imported goods would have been cleared to such non-bonded warehouses on payment of appropriate IGST/Customs duty and therefore the supply of maritime products on clearance from non-bonded warehouse to the vessels will not fall under Schedule III of CGST Act.

Hence, Supply from Bonded warehouse will fall under Schedule III of CGST Act and exempted from GST and supply from Non-Bonded warehouse will not fall under Schedule III of CGST Act and therefore will not be exempted from GST.

The Hon’ble AAR declined to answer on whether the said service shall be Intra/Inter-State or covered under the ambit of export of goods opining that this particular query is not covered under the purview of Section 97 and hence cannot be entertained as such.

Citation:  [2019] 107 taxmann.com 384 (AAR – MAHARASHTRA)

Important legal provisions:

Clause 8(a) of Schedule III covering “ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES” reads as follows:

…….

(a) Supply of warehoused goods to any person before clearance for home consumption;

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