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Clarification on GST implication on Goods Sent / Taken out of India for Exhibition or on Consignment basis for Export Promotion: CBIC

Issue involved: Whether the Goods Sent / Taken out of India for Exhibition or on Consignment basis for Export Promotion shall be treated as Supply?

CBIC has issued a circular clarifying in respect of the goods sent/ taken out of India for exhibition or on consignment basis for export promotion under the GST Law.

Relevant Points considered:

Section 7 of CGST Act, 2017-

For any activity or transaction to be considered a supply, it must satisfy the two conditions namely-

  1. It should be for a consideration by a person
  2. It should be in the course or furtherance of business.

In case of the activity of sending / taking the goods out of India for exhibition or on consignment basis for export promotion, this activity doesn’t fall under the purview of Supply as it is not fulfilling the condition of section 7 i.e. there is no consideration at this point.

Section 16 of IGST Act, 2017

As this activity doesn’t constitute supply, it cannot be said to be “ Zero Rated Supply” as per section 16.

Section 31 of CGST ACT, 2017

  • The specified goods sent/taken out of India are required to be either sold or brought back within the period of six months from the date of removal.
  • The supply would be deemed to have taken place, on the expiry of six months from the date of removal, if the specified goods are neither sold abroad nor brought back within the said period.
  • If the specified goods are sold abroad, fully or partially, within the specified period of six months, the supply is effected, in respect of quantity so sold, on the date of such sale.

Section 54 read with rule 89 of CGST Act,2017

  • The sender can prefer refund claim even when the specified goods were sent / taken out of India without execution of a bond or LUT.

While considering all above sections of Goods and service Tax Act, 2017, It has been clarified that the activity of sending / taking specified goods out of India is not a supply.

Further, clarifications have been issued relating to maintenance of records, issuance of delivery challan / tax invoice etc. These issues have been examined and the clarification on each of these points is as under:-

S.No. Issue Clarification
1.     Whether any records are required to be maintained by registered person for sending / taking specified goods out of India? Yes, the registered persons are required to maintain a record of such goods as per the format provided. (Refer Circular).
2.     What is the documentation required for sending / taking the specified goods out of India? a.   It has been clarified that the activity of sending specified goods out of India is not a supply.

b.   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.

The specified goods shall be accompanied with a delivery challan.

c.   The activity of sending / taking specified goods out of India is not a zero-rated supply.

Hence, execution of a bond or LUT is not required.

 

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

 

a.   The specified goods sent / taken out of India are required to be either sold or brought back within 6 months from the date of removal.

b.   The supply would be deemed to have taken place, on the expiry of 6 months from the date of removal, if the specified goods are neither sold abroad nor brought back within the said period.

c.   If the specified goods are sold abroad, fully or partially, within 6 months, 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 6 months, the sender shall issue a tax invoice in respect of such quantity of specified goods which has been sold abroad.

b.   When the specified goods sent / taken out of India have neither been sold nor brought back, either fully or partially, within 6 months, the sender shall issue a tax invoice on the date of expiry of 6 months from the date of removal, in respect of such quantity of specified goods which have neither been sold nor brought back.

 

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

b.   It has further been clarified in answer to question no. 3 above that the supply would be deemed to have taken place:

i.        On the date of expiry of six months from the date of removal, if the specified goods are neither sold nor brought back within the said period; or

ii.        On the date of sale, in respect of such quantity of specified goods which have been sold abroad within the specified period of six months.

c.   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, 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. Further, refund claim cannot be preferred as supply is taking place at a time after the goods have already been sent / taken out of India earlier.

 

Author: Niranjan Reddy

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