Notification GST Applicability and Customs Applicability on High Sea Sales Transactions
Financial Year: 2017
Article on GST Applicability on High Sea Sales Transactions:-
What is High Sea Sales
Sales made before getting goods cleared for home consumption is high sea sales.
Schedule 3 of CGST Act
(Point 7 And 8 and Explanation 2 has been inserted by CGST Amendment Act 2018 w.e.f 1-02-2019)
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
8.(a) Supply of warehoused goods
to any person
before clearance for home consumption;
(b) Supply of goods
by the consignee
to any other person,
by endorsement of documents of title to the goods,
after the goods have been dispatched
from the port of origin located outside India
but before clearance for home consumption.
Explanation 2:
For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962.
Lets go on the background:-
Section 7 of IGST Act
Determination of Nature of Supply
(1)
(2) Supply of goods imported into the territory of India,
till they cross the customs frontiers of India,
shall be treated to be a supply of goods in the course of inter-State trade or commerce.
(3)
(4)
(5)
Section 5 of IGST Act:-
5. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the
integrated goods and services tax on all inter-State supplies of goods or services or both,
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Provided that the integrated tax on goods imported into India
shall be levied and
collected in accordance with the
provisions of section 3 of the Customs Tariff Act, 1975
on the value as determined under the said Act
at the point when duties of customs are levied on
the said goods under section 12 of the Customs Act, 1962.
Circular No 33/2017 Customs:-
Circular 33/2017 Customs has been issued in Aug 2017 which clarified that there will be taxes levied in Customs Act only in case of High Sea Sales. (4th Point of Circular)
Circular No 3/1/2018-IGST:-
(Circular No. 3/1/2018-IGST dated 25th May 2018)
Integrated tax shall be levied and collected at the time of
final clearance of the warehoused goods for home consumption
i.e., at the time of filing the ex-bond bill of entry
and the value addition accruing at each stage of supply
shall form part of the value
on which the integrated tax would be payable
at the time of clearance of the warehoused goods for home consumption.
In other words,
the supply of goods before their clearance from the warehouse
would not be subject to the levy of integrated tax
and the same would be levied and collected only
when the warehoused goods are cleared for home consumption from the customs bonded warehouse.
Section 3 of Customs Tariff Act:-
Subsection 8A has been inserted to section 3 to be taken effect from 31st March 2018
(8A) Where the goods
deposited in a warehouse
under the provisions of the Customs Act, 1962
are sold to any person
before clearance for home consumption or export under the said Act,
the value of such goods for the purpose of calculating the integrated tax under sub-section (7) shall be, -
(a) where the whole of the goods are sold,
the value determined under sub-section (8) or
the transaction value of such goods,
whichever is higher; or
(b) where any part of the goods is sold,
the proportionate value of such goods as determined
under sub-section (8) or
the transaction value of such goods,
whichever is higher.
Section 17(3) Explanation
Explanation.— For the purposes of this sub-section,
the expression ‘‘value of exempt supply’’ shall not include
the value of activities or transactions specified in Schedule III,
except those specified in paragraph 5 of the said Schedule
(Inserted by CGST Amendment Act 2018)
Thanks
CA Rahul Gupta